Nvidia Is Gaining Today Despite Big Sell-Offs for the S&P 500 -- Is It Time to Buy the Artificial Intelligence (AI) Stock?
Nvidia's stock is rising despite a broader market sell-off, up 1.3% today. Key factors include a positive report on its next-gen Blackwell processors and increased chip purchases from Microsoft. Although Nvidia's stock has surged 167% this year, it remains a high-risk investment with a forward PE ratio of 45. Analysts suggest it may still be undervalued with a PEG ratio of 0.3, indicating strong growth potential in AI infrastructure. Risk-tolerant investors may find Nvidia a worthwhile buy at current prices.
Nvidia (NVDA 0.55%) stock is climbing higher in today's trading. The company's share price was up 1.3% as of 3:15 p.m. ET, and had been up as much as 4.8% earlier in the day's trading. Meanwhile, the S&P 500 (^GSPC -1.69%) was down 1.5%, and the Nasdaq Composite (^IXIC -2.37%) was down 1.9% due to hawkish comments from Federal Reserve chairman Jerome Powell that were delivered in conjunction with an interest rate cut.
Multiple upward catalysts
Nvidia stock is gaining thanks to multiple catalysts today. TrendForce published a new report today analyzing the production outlook for the artificial intelligence (AI) leader's next-generation Blackwell processors. TrendForce expects production of the company's GB200 processors to ramp rapidly and hit peak output in the second and third quarters of next year. Production of the new chips has largely gone as expected so far, and that's a good thing for Nvidia and its investors.
Nvidia stock may have also gotten a boost from a new report from The Financial Times indicating that Microsoft has purchased more than twice as many of the AI processing leader's chips this year than the company's second-largest customer, which is Meta Platforms. This could signal that Meta and other large tech companies still have plenty of investing to do when it comes to AI infrastructure. Additionally, Nvidia announced the Jetson Orin Nano Super Developer Kit, a new generative AI processor for hobbyists and students priced at $249.
Is Nvidia stock a buy?
Nvidia stock has been red hot this year and risen roughly 167% across the stretch. While its share price is down roughly 11% from its all-time high, the company still has a highly growth-dependent valuation and is a high-risk, high-reward investment candidate.
NVDA PE Ratio (Forward) data by YCharts
Valued at roughly 45 times this year's expected earnings, some strong future performance is already baked into Nvidia's share price. On the other hand, the company has been growing sales and earnings at a breakneck pace -- and impressive momentum looks poised to continue.
The stock currently has a forward price-to-earnings-growth (PEG) ratio of roughly 0.3. Meanwhile, a PEG ratio of less than 1 is often taken to be an indicator that a company is undervalued because its earnings have been expanding at a rate faster than corresponding increases for its valuation.
Given Nvidia's dominant position in processors for advanced AI applications, the stock still looks like a worthwhile buy for risk-tolerant investors at today's prices. While the business will undoubtedly see some cyclical demand shifts that shape sales and earnings performance, there are good reasons to think that investment in AI infrastructure is still in the very early innings of its long-term trajectory.