Is it the Right Time to Invest in Nvidia Stock or Should You Hold Off for a Market Correction?

Is it the Right Time to Invest in Nvidia Stock or Should You Hold Off for a Market Correction?

Nvidia (NASDAQ:NVDA) has been a growth machine recently. Revenues and profits are exploding. The chipmaker has become synonymous with artificial intelligence (AI). Its high-power chips are in high demand for powering compute-intensive AI systems, and they have become crucial for many companies. The downside for investors could be that the stock has already generated such impressive returns that it may be too late to fully benefit from the growth.

The stock is up more than 220% over the past year and the company’s market capitalization now exceeds $2 trillion. Some investors are now wondering whether they would be better off waiting for Nvidia’s stock price to fall. Or should they add shares now anyway?

Optimistic arguments for Nvidia

As expensive as Nvidia’s stock is, AI’s potential suggests that investors should remain bullish on it as an investment. The technology is still in its early stages and companies are just beginning to develop AI models. According to a recent forecast of GartnerThe global AI chip market will reach $119.4 billion by 2027, more than double what it was worth in 2023.

Nvidia, as the dominant industry player and AI chip supplier, stands to benefit from this growth. In the company’s most recent fiscal year, which ended Jan. 28, revenue grew 126% to just under $61 billion, and net income was nearly the half of that figure, at around $30 billion.

As demand for AI chips increases, it’s easy to see a path for Nvidia’s profits to continue to grow, making its current valuation less of an issue for long-term buy-and-hold investors.

The bear case for Nvidia

The biggest concern with these AI developments is that the reality does not match the hype. Sam Altman, CEO of OpenAI, said that when it comes to what AI can do, “people are begging to be disappointed and they will be.” Although it can improve productivity, the potential of this technology, at least in the short term, may have been oversold.

Meanwhile, investors in many companies are paying for these sky-high expectations. Nvidia’s valuation may seem relatively reasonable considering its price/earnings/growth ratio, which is around 1.2, but this still implies a high level of earnings growth over the next five years. If these assumptions prove too optimistic, it could make the AI Actions vulnerable to liquidation.

Additionally, there is always a risk of recession. Even though there is talk of a possible soft landing for the American economy, if it turns out to be less efficient than expected, companies could reduce their investments and spending linked to AI, especially if the gains that What they get out of it is not immediate or sufficiently impactful.

Should you invest in Nvidia stocks?

Nvidia is a leading company in the AI ​​space and this could be a great way to invest in the technology. But investors should consider its valuation and the assumptions they’re making when looking at its price. If you are optimistic about AI and believe it will be a game changer for industries and businesses around the world, then it is definitely not too late to invest in Nvidia given its dominant presence in the sector and future growth opportunities.

Trying to time the market, however, and waiting for Nvidia’s stock to drop may not be ideal, as there’s a good chance they won’t fall significantly unless there is. has an economy-related market sell-off, which would mean its growth prospects have been reduced. has taken a major hit, in which case the entire investment thesis in the stock may also change. So as long as you’re bullish on AI, Nvidia can still be a good buy right now.

Should you invest $1,000 in Nvidia right now?

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool Ranks and Recommends Nvidia. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

Should you buy Nvidia stock now or wait for a drop? was originally published by The Motley Fool

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