Investors who’ve been watching Nvidia (NASDAQ: NVDA) stock recently might have a headache from seeing it yo-yo. I know I certainly do.
While it’s still up a magnificent 105.4% year to date, the last month’s been volatile. That’s in part due to fears of a potential recession across the pond.
Nvidia’s down 15.9% in just the last five days. It’s fallen 22.8% across the last month. During that time, it peaked as high as $134.9 and as low as its current price of $98.9.
So now below $100, could that be a great time for me to consider swooping in and picking up some shares in the artificial intelligence (AI) leader? Let’s take a look.
Still expensive?
The stock’s seen nearly $30 shaved off its price in the last month. But even with that it still looks expensive.
It now trades on a price-to-earnings (P/E) ratio of 57.9. For context, the S&P 500 average is around 23. It’s a lot cheaper than the 68.5 P/E it was trading on at the beginning of the month. But it’s far from a bargain.
There’s been a tech sell-off in recent days. So while all the remaining ‘Magnificent Seven’ have become slightly cheaper, Nvidia still remains the most expensive of the bunch. The closest is Tesla, with a P/E of 53.9.
A bubble?
With that in mind, it’s no surprise hedge fund Elliott Management recently said the stock was in a “bubble” and its share price was “overhyped”. Could that be a further reason for its recent decline?
Nvidia’s share price rally in the past couple of years has been boosted by big spending from tech firms on its chips.
However, Elliott Management also said it was “sceptical” whether this big spending would continue. It further went on to say AI is “overhyped with many applications not ready for prime time”.
While I remain bullish on Nvidia’s impact on the world in the long run, I would be lying if I said its recent volatility hadn’t heightened my fear of it being a bubble waiting to burst.
Long-term picture
But then as a long-term investor, I’ve trained myself to block out short-term peaks and troughs and focus on the bigger picture.
There’s no doubt AI will continue to shape the world in the years to come. And we’ve seen the billions that major companies have allocated to spend on AI in the times ahead. Nvidia will be a direct beneficiary of this.
Could it be the case that a positive update when it next releases results will send its share price spiking and rekindle investor confidence about AI’s long-term potential?
After all, founder and CEO Jensen Huang recently claimed that “the next industrial revolution has begun”.
My verdict
Under $100, would I be silly not to consider adding some more Nvidia shares to my portfolio today? I’m not sure. I already own some stock. My average buy price is $42.50.
I have no plans to sell the shares I own. But given its recent volatility, I’m not keen on buying more shares right now.
Its next results are due for release on 28 August. I’ll be watching the market’s reaction to those very closely.
