Nasdaq Composite (^ixic -4.00%)) Moved to the correctional area (at least 10% less than the all-time high). The key contributor to that decline was nvidia (NVDA) -5.07%)) At the time of writing, the stock has dropped by about 20% so far. Chipmakers have recently reported outstanding results, but investors suddenly rattled the market soon, as tariff concerns and the US seemed to be heading for a recession.
For investors with long-term thinking, this price correction offers a great opportunity to scoop Nvidia’s shares cheaply. Let’s take a look at three reasons why stocks are a must-see for the long term with this dip.
1. NVIDIA is an AI infrastructure leader
With a market share of around 90% of its Graphic Processing Units (GPUs), Nvidia is the dominant leader in chip designers powering the build-out of artificial intelligence (AI) infrastructure. Originally designed to speed up graphics rendering in video games, Nvidia’s GPU’s fast processing times make it ideal for training large-scale language models (LLMs) and performing AI inferences.
Additionally, the company’s Compute Unified Device Architecture (CUDA) platform helped create a wide range of moats for the company. Nvidia became the first company to enable GPUs to be programmed for tasks other than their original purpose through CUDA in 2006. So developers have learned to program GPUs using NVIDIA’s software platform.
Rival Advanced Micro Devices (AMD) -3.67%)) Meanwhile, NVIDIA did not introduce the ROCM (Radeon Open Compute) software platform about ten years after 2016 via CUDA-X, built on top of CUDA. Today, NVIDIA features a complete software stack designed to accelerate applications in the realm of libraries, microservices, and AI and high-performance computing.
CUDA and CUDA-X continue to be the main reasons for Nvidia’s domination, particularly in AI model training. A recent study found that in Semiconductor Research Outfit Semianalysis, while praised Nvidia’s chips, AI’s latest GPUs cannot be out of the box and trained due to software bugs. As such, Nvidia remains the perfect company to continue to benefit from the growth of its AI infrastructure.
Image source: Getty Images
2. AI Data Center Infrastructure continues to grow
Despite the claims that Chinese AI company Deepseek builds effective AI models cheaply (it’s controversy about how effective they are in fact), the best known way to advance AI models is through the power of brute computing power. This means building systems with more and more AI chip clusters.
Recent iterations of AI models required training exponentially more GPU chips than their predecessors. For example, the Llama 4 LLM on Meta Platform required training more GPUs than the Llama 3. Meanwhile, Xai, backed by Elon Musk, originally built the Grok 3 model after hitting up to 200,000 GPUs, using five times more GPUs (100,000).
Meanwhile, cloud computing companies, together with other high-tech companies, are putting their money into building AI data centers. The Big 3 cloud computing company plans to spend this year combining $255 billion in buildings on AI data centers to meet demand.
Cloud computing is an infrastructure-as-a-service platform that helps customers use these services to customize and build their own AI models and applications. Meanwhile, META is planning to spend up to $65 billion of capital expenditures (CAPEX) this year aimed at expanding its AI infrastructure. Meanwhile, the consortium led by Openai and SoftBank has pledged to spend $500 billion over the next few years.
All this represents many ongoing future spending on AI infrastructure over the next few years. So Nvidia is well located to continue growing.
3. NVIDIA stock is cheap
The third major reason for owning Nvidia is that its inventory remains at an attractive price. The stock is currently trading at a positive price-to-earning ratio (P/E) of 24 times the 2025 analyst estimate and at a price/revenue and growth rate (PEG) of less than 0.5. A PEG ratio below 1 usually indicates that inventory is undervalued, and growth stocks often trade at PEG well above 1.
Data by ycharts.
Nvidia is not a Software as a Service (SaaS) company with repeated, predictable revenue streams, and therefore cannot direct the same type of valuation multiple as these types of companies. However, the current rating is inexpensive. This is the early days of AI and is inexpensive given that AI infrastructure spending continues to rise. So, these days pullbacks look like a solid long-term opportunity to buy stocks.
Randi Zuckerberg, a former director of market development, Facebook spokeswoman and sister to Metaplatform CEO Mark Zuckerberg, is a member of Motley Fool’s board of directors. Geoffrey Seiler has no position in any of the stocks mentioned. Motley Fool features advanced microdevice, meta platforms and Nvidia, and recommends. Motley Fools have a disclosure policy.
