As an investor it is often a case of ‘right company, wrong price’ or simply ‘wrong company’ when it comes to building my portfolio. Nvidia (NASDAQ: NVDA) is the former. It is a share I would gladly own – if only I could buy it at an attractive price. But with Nvidia stock having fallen 12% over the past week — meaning it is 23% cheaper than at its January high point – could now be the moment for me to make the move?
Here are a few questions I have.
Question 1: why the price fall?
When a share falls in price and I am potentially interested in buying it, I always try to understand why the price has fallen.
That can be wider market sentiment, a change in investors’ focus or something more company-specific such as the release of an earnings report or profit warning.
Last week saw Nvidia release its 2025 financial results.
Were they terrible, explaining the fall in the price?
On the contrary, to me they looked very strong.
Full-year revenue more than doubled to a record $131bn. Net income rose even more (by 130%) to $74bn.
The chief executive sounded upbeat about business prospects, saying that “AI is advancing at light speed”.
Question 2: how attractive is the business?
Whenever I think of buying any share, I want to know what I am getting into.
I am not just buying a number, hoping that it goes up. Instead, I see things the way billionaire investor Warren Buffett does. I am buying a stake in a business. I want to understand the business and its prospects.
As the fall in the Nvidia stock price suggests, some investors are worried that demand for microchips could slow. Add to that the threat of trade tariffs hurting demand and snarling complex global supply chains and there are clearly risks for a firm such as Nvidia.
However, Nvidia’s recent performance has been little short of phenomenal in my view. $74bn of net income is something very few companies achieve.
Can the good times keep rolling?
Although I see risks, I reckon Nvidia has a lot going for it too.
Chip demand is huge (even without AI) and is likely to stay that way. AI investment may reduce once the initial spending spree is over. But it could go the other way. Maybe if companies really do see benefits from their AI spending they will start shelling out even more, not less, on chips.
Nvidia has a large existing client base and many proprietary chip designs. This is a company in which I would gladly invest.
Question 3: is the current price an attractive one?
But I do not want to overpay.
So, does the recent fall in the Nvidia stock price bring it within a range I consider attractive?
For me, the answer is no.
Nvidia’s price-to-earnings (P/E) ratio is now 38. The prospective P/E ratio could be even lower if the company’s strong earnings growth continues.
But that still looks a bit pricey for my tastes. I prefer a higher margin of safety. So I will do nothing now but wait to see whether the share falls further to what I see as a buying level.
