Nvidia’s Stock at a Decade-Low Valuation—Time to Buy the Dip?

If you’ve been keeping an eye on the tech sector, you’ve likely noticed the recent volatility in NVIDIA’s stock. But as the saying goes, “When there’s blood in the streets, the best buys are made.” And that’s exactly what Bernstein analyst Stacy Rasgon seems to be suggesting in their latest report.

NVIDIA’s shares took a hit on Monday, falling 8.7%, and have declined 15% year-to-date. However, this sharp selloff might just be creating an attractive entry point for investors, according to Rasgon.

Valuation Metrics

First off, Nvidia's stock is now trading at just a slight premium to the S&P 500, the lowest since 2016. It's also trading below parity compared to the PHLX Semiconductor Index (.SOX.US), a rare occurrence that's only happened once or twice in the last decade. On a relative basis, Nvidia shares are near decade lows.

Additionally, the stock is currently trading at roughly 25 times forward earnings, the lowest multiple in a year and near decade lows. Historically, investors have done well buying Nvidia at 25x or lower. So, if history is any indicator, this could be a great entry point.

Business Fundamentals

Nvidia recently launched its Blackwell product cycle, and while there were some initial hiccups, the company seems to have ironed out the issues. Last quarter, they shipped $11 billion worth of Blackwell products, and with customers ramping up their capital spending, the future looks promising.

Rasgon believes the “floodgates are now open” for this product, which could drive significant revenue growth in the coming quarters. The demand for AI and data center solutions is only going to grow, and Nvidia is well-positioned to capitalize on this trend.

Regulatory Risks

Of course, it's not all sunshine and rainbows. There are emerging regulatory risks, particularly concerning AI chip sales to China. The Biden administration has imposed new restrictions at the end of the term, set to take effect in May, and there's uncertainty about how the Trump administration might handle this since they return to power.

Rasgon argues that an H20 ban (H20 is a chip Nvidia sells in China to comply with performance restrictions) would "make zero sense" as it would essentially hand the Chinese AI market to Huawei. But given the current political climate and the unpredictable nature of regulations, this is a risk that investors need to monitor closely.

My Take: A Buying Opportunity

In my view, NVIDIA’s current valuation is hard to ignore. The combination of a decade-low relative valuation and a promising product cycle makes it an intriguing opportunity. Sure, there are risks—regulatory uncertainty is a big one—but the potential upside seems to outweigh the downside at this point.

Rasgon rates the stock at "outperform" with a $185 target price, and I tend to agree. The sentiment around AI stocks has shifted, but the spending intentions are still rising, and the product cycle is just kicking off.

Moreover, the upcoming GTC 2025 conference (March 17-21) could be a catalyst for the stock. This event is a showcase for NVIDIA’s latest innovations and a platform to reaffirm its leadership in AI. If history is any guide, GTC has often been a springboard for positive investor sentiment. #nvidia $NVDA