NVIDIA Corporation NVDA stock has tumbled 21% over the past month, largely due to concerns over Chinese AI startup DeepSeek’s breakthrough in developing a competitive AI model at a lower cost. The sell-off was particularly brutal on Jan. 27 when NVDA plunged 17% in a single day, erasing nearly $600 billion in market value on fears that DeepSeek’s innovation could reduce demand for NVIDIA’s high-end graphics processing units (GPUs).
One-Month Price Return Performance
Image Source: Zacks Investment Research
Apart from NVIDIA, shares of AI chip and component providers Marvell Technology, Inc. MRVL, Broadcom Inc. AVGO and Amphenol Corporation APH fell 19.1%, 17.4% and 12.6%, respectively, on Jan. 27.
But is this panic justified? Or does this dip present a rare chance to buy one of the best AI stocks at a discount?
DeepSeek’s Threat Is Overblown
The market often reacts emotionally, and NVIDIA’s recent plunge is a textbook example. While DeepSeek’s AI model is impressive, it still relies on NVIDIA’s GPUs. The startup’s cost efficiency doesn’t necessarily mean a reduction in NVIDIA’s market dominance — it may actually expand AI adoption, driving even greater demand for GPUs.
Microsoft CEO Satya Nadella highlighted the concept of the Jevons Paradox, which suggests that efficiency improvements lead to higher overall consumption. If AI models become cheaper and more efficient, it could accelerate adoption, leading to even greater reliance on NVIDIA’s cutting-edge hardware. Instead of being a headwind, DeepSeek’s breakthrough could be a long-term growth catalyst for NVIDIA.
NVIDIA’s Fundamentals Are Still Exceptional
Despite the recent correction, NVIDIA remains one of the strongest companies in the semiconductor space. Over the past year, NVDA has been up 70.4%, outpacing the Semiconductor – General industry’s 55.2% gain. The company’s AI dominance, along with its growing influence in cloud computing, autonomous vehicles and healthcare, continues to fuel its long-term potential.
The data center segment is a major growth driver, benefiting from the AI boom and cloud computing expansion. With businesses investing aggressively in AI infrastructure, NVIDIA’s high-performance chips are becoming mission-critical.
Financially, NVIDIA continues to impress. In the third quarter of fiscal 2025, revenues surged 94% year over year, and non-GAAP EPS soared 103%. For the fourth quarter, NVIDIA expects revenues of $37.5 billion, a staggering increase from $22.1 billion a year ago.
NVIDIA Corporation Price, Consensus and EPS Surprise
NVIDIA Corporation price-consensus-eps-surprise-chart | NVIDIA Corporation Quote
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 and 2026 revenues indicates growth of 111.8% and 48.7%, respectively. The consensus mark for earnings implies a year-over-year increase of 126.2% in fiscal 2025 and 43.2% in fiscal 2026.
These forecasts reflect confidence in the company’s sustained growth and market leadership across multiple sectors, including gaming, automotive and professional visualization. NVIDIA surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 9.8%.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
NVIDIA Valuation: A Premium Worth Paying
While NVIDIA stock isn’t cheap, its premium valuation is justified. The company trades at a forward price-to-earnings (P/E) ratio of 39.51, higher than the industry’s average of 30.85. However, given NVIDIA’s dominance in AI, strong financial growth and exposure to multiple high-growth sectors, this premium is well deserved. Investors often pay up for market leaders, and NVIDIA’s sustained leadership in AI and computing makes it a compelling long-term investment.
Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
Conclusion: Buy NVIDIA Stock Now
NVIDIA’s 21% pullback presents a compelling buying opportunity. The fears surrounding DeepSeek are exaggerated, and the long-term AI megatrend remains intact. With stellar financials, market leadership and relentless innovation, NVIDIA is well-positioned to rebound and reach new highs. Currently, NVIDIA carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
