Nvidia Stock – Buy The Dip?

Nvidia shares fell nearly 6%…

Erasing $130 billion in market value.

The pullback in NVDA stock comes after a remarkable 79% YTD gain.

Artificial Intelligence is the biggest tech innovation since the Internet. It’s bigger than social media, the cloud or mobile.

And Nvidia is the best large-cap pure play on the AI Revolution.

The stock’s gains have been unstoppable…

Should investors BUY Nvidia after the pullback?

Here’s the basic argument from Nvidia bears…

“Nvidia shares are up 275% in the last year. Nvidia sales and earnings are growing. However, the stock is over-priced after this move.

AI is largely hype. Companies are buying lots of AI chips from Nvidia now. But they will buy too many and demand will dry up. And Nvidia shares will crash.”

This view ignores the facts…

1. Demand for Nvidia chips is off the charts.

There’s a huge backlog for the current H100 AI chips. Plus, the H200 chips will be released this year and are 2x as fast.

Data centers around the world are rushing to upgrade. This is a multi-year cycle. And Nvidia is the #1 beneficiary.

2. Nvidia results justify the stock price.

Nvidia isn’t simply hype.

Revenues will jump from $27 billion in fiscal 2022 to $100 billion in fiscal 2025 (this year).

That means revenues grew by 273% in 3 years. Meanwhile, the stock has gone from $230 to $875. That’s a 220% gain.

This means…

Nvidia’s share price is rising alongside its financial performance.

3. Nvidia stock is cheap compared with its growth rate.

Nvidia shares are trading at $875.

EPS are expected to hit $22 this year.

That means shares are trading at 39-times earnings (the P/E multiple). That’s rich compared with the S&P 500 trading at 21-times earnings.

But it’s also important to compare this to the rate of growth.

The average S&P company is expected to grow earnings by 11% this year.

How about Nvidia?

Earnings are expected to double this year.

IMO that justifies a P/E multiple that’s 2x the overall market.

A pullback in Nvidia stock creates an opportunity to build a position in the stock.

The chart clearly shows…

NVDA shares are moving up and to the right. You don’t want to miss out on that type of move.

Ian