Nvidia (NASDAQ: NVDA) stock has experienced a pullback recently. Since early September, it has fallen from around $500 to $440 (it was back near $400 late last month).
Now, I have a feeling that the chip stock may actually fall all the way down to around the $350 level. If it does, I will be loading up on it.
On the way to $350?
Taking a long-term view, I’m very bullish on Nvidia. Indeed, I’ve said before that if I could only hold one stock for the next decade, it would be this company.
In the near term, however, I think we may see the Nvidia share price come down to somewhere near $350. There are a few reasons I say this.
One is that the stock has recently formed quite a prominent ‘head and shoulders’ chart pattern. This typically indicates that there is share price weakness ahead.
Another is that there is a huge share price ‘gap’ in the chart around the $350 level (where the share price jumped from roughly $345 to $365 with no trading in between these levels) in May. More often than not, gaps tend to get filled eventually.
Finally, the stock’s 200-day moving average (i.e., the long-term trend line) is currently around the $350 level. If the share price did keep falling from here, I would expect this level to provide some support.
Long-term growth potential
Now, I took some profits off the table here in July. When the share price rose up to near $480, I sold 25% of my holding just to lock in some gains.
However, if the stock falls back to around $350, I will be buying again. And I will be buying aggressively.
To my mind, there are few companies in the world that have the long-term growth potential that Nvidia has.
This is a company that is a well placed to benefit from the growth of a wide range of industries including:
- Artificial intelligence (AI) – Nvidia has an 80% market share of the AI chip industry. And this industry is projected to be worth over $300bn by 2030
- Data centres – Last fiscal year (ended 30 January), Nvidia’s revenue here rose 41% to a record $15bn
- Video gaming – The company remains the market leader in the gaming GPU (graphics processing unit) space
- Self-driving cars – Nvidia’s hardware is likely to help autonomous vehicles become a reality
- The metaverse – Whatever the metaverse turns out to be, it’s likely to be built on Nvidia chips
Overall, the company’s potential is enormous.
And if the stock was to fall to $350, I’d be getting it at a forward-looking price-to-earnings (P/E) ratio of somewhere around 20 (using the earnings forecast for the year ending 31 January 2025).
That would be an absolute steal, in my view.
A volatile stock
Of course, we may not see $350 any time soon.
In the last few days, the growth stock has started to rise again (thanks to falling bond yields).
If earnings later this month (21 November) are strong, it may pop higher. This is an incredibly volatile stock.
So, I’m sure there will be some great opportunities for those who like to buy on weakness – like myself – in the not-too-distant future.
