Don’t Panic! Nvidia’s Sell-Off is a Great Buying Opportunity
Despite the panic that sell-offs can cause, now it is actually a perfect time to be “greedy.” $NVIDIA Corp(NVDA)$ has led the AI stock surge since ChatGPT's debut, but doubts about whether this rally can continue are becoming more reasonable.
Nvidia’s earnings report on August 28 exceeded analyst expectations, but the stock still fell. This might suggest that the company’s valuation has outpaced its business growth. Last week, Nvidia's stock dropped again after reports that the U.S. Department of Justice had subpoenaed the company. Then, the stock fell another 4% last Friday due to a weak jobs report.
Since the release of its Q2 2025 earnings, Nvidia's stock has fallen over 18%. Despite the gloomy market sentiment, this sell-off presents an excellent buying opportunity for Three reasons:
1.Nvidia Stock Isn’t Actually Overpriced
Nvidia’s stock has dropped significantly compared to a few weeks ago, but it still appears expensive by traditional metrics, with a P/E ratio of 49.5. However, the company’s growth remains impressive, with adjusted EPS doubling in Q2 and expected to do the same in Q3. Analysts predict an adjusted EPS of $2.84, which lowers the dynamic P/E ratio to 36, comparable to tech giants like $Apple(AAPL)$ and $Microsoft(MSFT)$
Moreover, analysts have consistently underestimated Nvidia’s earnings growth, so actual results could exceed expectations. Looking ahead, Nvidia is set up for continued growth, with its Blackwell platform expected to reach mass production and shipping in Q4, likely sustaining growth into 2025.
2.The Sell-Off is Overdone
Nvidia’s stock fell 18% in just six trading days, but a closer look at the news during this period reveals little justification for such a steep drop.
The post-earnings decline of 6.4% seemed to be driven by guidance that fell short of some investors' expectations and a sequential drop in gross margins. However, the overall quarterly performance was strong and exceeded analyst expectations.
Regarding the DOJ subpoena news, Nvidia clarified that it had not received any subpoenas.
The stock’s drop last Friday was also overblown. While Nvidia’s sector has some cyclicality, the momentum in generative AI is stronger than typical cyclical expansions.
Additionally, despite weak August job growth, the unemployment rate remains low at 4.2%. Thus, the market’s reaction to the jobs report and the Nasdaq’s 2.6% drop last Friday appears to be an overreaction.
3.Business Resilience
While recent sell-offs reflect investor fears that the AI investment boom might be ending, Nvidia remains a dominant player in the data center GPU market, where demand is unlikely to fade quickly.
Major tech companies like Microsoft, $Alphabet(GOOG)$ $Alphabet(GOOGL)$ $Meta Platforms, Inc.(META)$ $Tesla Motors(TSLA)$ emphasize the importance of building AI infrastructure and consider underinvestment in this area a bigger risk than overinvestment. These tech giants are committed to AI infrastructure investments, and minor economic headwinds won’t reverse this trend.
In conclusion, investors can stay calm. Nvidia is likely to maintain strong growth despite economic slowdowns, making the recent sell-off a prime buying opportunity.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
