Nvidia (NASDAQ: NVDA) stock has experienced a big pullback recently and as a result it now looks very cheap. Believe it or not, it’s now far cheaper than when generative artificial intelligence (AI) app ChatGPT was launched (while many other AI stocks are trading at much higher valuations).
Is it time to buy more shares in the technology powerhouse for my portfolio? Let’s discuss.
Nvidia looks insanely cheap to me
Crunching the numbers, I’m actually amazed at how cheap Nvidia is right now. At present, analysts expect the tech company to generate earnings per share (EPS) of $4.43 this financial year (ending 31 January 2026) and $5.65 the next fiscal year. So at today’s share price of $97, the forward-looking price-to-earnings (P/E) ratio’s just 22, falling to a low 17 using next financial year’s EPS forecast.
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A P/E ratio of 17 for one of the most innovative growth companies on the planet? That has to be a steal? What’s even more impressive is the price-to-earnings-to-growth (PEG) ratio. This financial year, Nvidia’s earnings are forecast to increase a whopping 50%. So we’re looking at a PEG ratio of just 0.44. Again, that looks a steal. Generally speaking, a ratio under one indicates a stock’s cheap.
Given that this company is at the heart of the AI revolution, and that the AI industry’s expected to grow significantly over the next decade (one analyst believes that $2trn will be spent on AI chips in the next three years) I see a lot of value on offer at those multiples. To my mind, the stock looks ‘oversold’ right now.
What am I missing?
Of course, there are many risks to consider with this growth stock right now. For starters, we have US tariffs. The rules here are changing from day to day, but it’s highly likely that Nvidia will be impacted in some shape or form.
Then there are US chip export restrictions. Last week, the company said that it would be hit with a $5.5bn charge over export rules to China. Additionally, there’s the risk that tech giants like Microsoft and Alphabet could suddenly lower their spending on AI chips. This scenario could hit growth significantly.
Finally, there’s the risk of a global economic slowdown or recession. This would most likely lead to lower demand for Nvidia’s products.
All of these issues are genuine risks to the investment case (earnings) and could impact the stock negatively.
I’m a buyer here
Still, as a long-term investor, I can’t help but think there’s an opportunity here while the stock’s near $100. I continue to believe that over the next five years, this company’s going to get much bigger as the world becomes more digital and technologies such as AI and self-driving cars are rolled out.
I bought a few shares earlier in the month when they were trading under $100. And I plan to buy a few more in the next week or so, assuming the share price doesn’t suddenly rocket higher.
