Think Nvidia Is Still Expensive? This Chart Might Change Your Mind.
The recent market volatility has created opportunities for investors, particularly in Nvidia (NVDA), which has seen a 400% rise over the past three years. Despite concerns about its valuation, Nvidia's strong demand for AI GPU chips and its positioning in robotics and driver assistance technology suggest a bright future. Currently, its price-to-earnings (P/E) ratio is below 25, making it an attractive buy. Investors are encouraged to consider entering the stock now, as waiting may lead to missed opportunities.
The recent market turmoil can make any investor nervous. Volatility can be scary as you see the value of your portfolio slump along with the market. For those who remain calm and stay focused on the underlying businesses, it can mean opportunity.
Some stocks have risen to nosebleed levels over the past two years in the bull market. Nvidia (NVDA -0.18%) has been a favorite name, but many investors may have felt they missed the boat as the stock soared. Even with the recent market correction, shares have risen over 400% in the last three years. While some may still view the artificial intelligence (AI) leader as expensive, there is good evidence that now is a great time to buy Nvidia stock.
Nvidia has a very bright future
Regardless of whether a trade war accelerates or if tariffs raise prices and slow economic growth, Nvidia's business has some built-in insulation. Its AI GPU chips, software stacks, and related architecture are in high demand and should be for a long time to come. The company is also very well positioned for the advancement of robotics and driver assistance technology.
Now investors can get on board the Nvidia train at a valuation it hasn't hit in more than a year. Fear in the market has driven the price-to-earnings (P/E) ratio to below 25 based on this year's earnings estimate.
NVDA PE Ratio (Forward) data by YCharts
If shares remain stagnant, that valuation will become even more compelling as sales continue to grow. But waiting could cause investors to be left behind. If new catalysts spur sales growth even further, investors will pour back into Nvidia stock.
While it may be smart to average into the stock slowly in these uncertain times, now is the time to start. Fear is in the market right now. Warren Buffett famously said to be greedy when others are fearful. Investors should apply that advice to Nvidia stock while its valuation remains compelling.