NVIDIA Corporation (NVDA Quick QuoteNVDA – Shares of semiconductor giant IBM ( free report ) have fallen more than 21% over the past month, significantly outpacing the Zacks Computer Technology sector’s 14.1% decline and the S&P 500’s 7.3% decline.
NVIDIA shares have plummeted after hitting an all-time high in June, making it one of the world’s most valuable companies. The recent drop has left investors at a crossroads, raising the question of whether now is the time to buy, hold, or sell.
Price trend over the past month
Image source: Zacks Investment Research
What’s causing the recent sell-off?
A number of factors are responsible for NVIDIA’s recent share price decline. Market-wide anxiety stems from concerns over the Federal Reserve’s interest rate policy and worries about an impending U.S. recession. These macroeconomic concerns have certainly weighed on tech stocks, including NVIDIA.
A key factor specific to NVIDIA is the US government’s tightening restrictions on exports of advanced AI chips to China. These measures are intended to curb China’s military power, but also threaten a major source of revenue for NVIDIA given China’s demand for cutting-edge AI technology.
Additionally, reports of delayed deliveries of NVIDIA’s highly anticipated AI chip, code-named Blackwell, are stoking fears. According to The Information, the delays are due to a design flaw that could delay deliveries by more than three months, potentially affecting major customers such as Microsoft Corporation (MSFT Quick Quote).MSFT – Free Report), Amazon.com, Inc. (AMZN Quick QuoteAmazon – Free Report), Alphabet, MetaPlatform. Such delays could drive potential customers to competitors such as Advanced Micro Devices (AMD Quick Quote).Am – (free report) further weakened NVIDIA’s near-term outlook.
Trading below major moving averages
Adding further concern to investors, Nvidia’s stock price has fallen below its 50-day moving average, a technical indicator that is often seen as a bearish signal. The move suggests the downward trend may continue, at least in the short term.
50-day moving average
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High valuation
Despite NVIDIA’s strong fundamentals, its valuation remains a topic of debate. The company’s current price-to-sales ratio (P/S) is significantly higher than the Zacks Semiconductor – General industry average, suggesting that much of the company’s expected growth is already priced into the stock price. This leaves little room for error and makes the company’s stock especially vulnerable to negative developments or earnings shortfalls.
Image source: Zacks Investment Research
Long-term outlook remains positive
Despite short-term challenges, it’s not all doom and gloom for NVIDIA. The company has been outstanding. In its most recent fiscal first quarter 2025 earnings report, it reported an astounding 262% increase in revenue and more than five times growth in non-GAAP EPS. NVIDIA’s leadership in graphics processing units (GPUs) for gaming, data center, and professional visualization continues to drive the company’s growth.
Looking ahead, NVIDIA is well positioned to capitalize on several key trends, including artificial intelligence, self-driving cars and the burgeoning metaverse. These technologies are expected to experience significant growth, providing a strong foundation of demand for NVIDIA’s advanced chips. The company’s second-quarter revenue forecast is $28 billion, up significantly from $13.51 billion in the year-ago period.
Impressive long-term predictions
Analysts remain optimistic about NVIDIA’s future. The Zacks Consensus Estimates project revenue and earnings to grow 93.4% and 106.9% year-over-year in fiscal 2025. Furthermore, the long-term earnings growth rate is expected to be impressive at 37.6%, compared to the industry average of 18.9%. This bullish outlook is reflected in the upward revision of the company’s earnings estimates.
Image source: Zacks Investment Research
Final thoughts
Given the recent volatility and potential challenges ahead, investors may consider waiting for a more favorable entry point. While the long-term growth story of this Zacks Rank #3 (Hold) company remains attractive, issues including product delays, an overvalued valuation and macroeconomic headwinds mean now may not be the ideal time to buy aggressively. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
For current shareholders, it would be prudent to hold onto the stock as the company’s fundamental strengths and growth drivers remain intact, but new investors should consider waiting for a more attractive entry point, potentially with further downside, to avoid overpaying for future growth.
In summary, NVIDIA remains a dominant force in key markets, but the current environment suggests caution. NVIDIA is a stock worth holding, but potential buyers may find better opportunities by waiting for a lower entry price.
