Nvidia (NASDAQ: NVDA) stock’s down significantly this week. On Monday (27 January), it fell a whopping 17%.
While I’ve owned this stock for many years now and it’s a large position for me today, I’ve been toying with the idea of buying a few more shares lately. Is now a good time to do so? Let’s discuss.
Why’s the share price tanked?
First, let’s take a look at what’s going on here. Why has Nvidia’s share price suddenly tanked? Well, this is related to the emergence of DeepSeek, a Chinese generative AI app that’s similar to ChatGPT (and currently the most downloaded app in Apple’s App Store).
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To build this kind of app, it generally takes a lot of AI chips (or GPUs). In this case, the developer’s used Nvidia’s H800 chips – a scaled down version of its H100 chip (that it exports to China).
What has spooked investors however, is that it’s claimed the cost to develop DeepSeek was just $6m. This is far lower than companies such as OpenAI, Meta and Alphabet have spent to develop their own AI chatbots.
So all of a sudden, investors are recalibrating their expectations for spending on Nvidia’s AI chips in the years ahead. If DeepSeek was built at a cost of less than $6m, maybe AI giants like Alphabet and Meta won’t have to spend tens of billions on Nvidia’s products.
Up until recently, it was assumed that a ton of money would be spent on Nvidia’s chips in the years ahead. For example, Meta recently said that it would spend up to $65bn on AI in 2025.
The outlook may have just changed.
My move now
Given the uncertainty, I’m not going to buy more Nvidia shares just yet. My gut feeling is that I could be about to see a great buying opportunity here.
But I want to let the dust settle first. I also want to do a little more research and hear the opinions of experts in the AI space. Right now, everyone’s still trying to process the very-much-unexpected news (which is why the share price fell so much).
I would also like to see Nvidia CEO Jensen Huang (who I regard as one of the best CEOs in the world) address the issue properly. But with earnings coming up, he may not be able to say much as it’s a ‘quiet period’ right now, meaning that companies aren’t allowed to discuss new information.
It’s worth noting that if we take the current earnings per share (EPS) forecast for the year ending 31 January 2026 ($4.43), the price-to-earnings (P/E) ratio here’s just 29. That strikes me as relatively low.
It’s hard to know if we can trust that EPS forecast right now though (it may be too high). That’s why I’m going to wait a bit and do some more research before snapping up more shares.
