At its lowest point on 7 April, the Nvidia (NASDAQ:NVDA) stock price was down 43% from its 52-week high of $153. But from a low of under $87, we’ve already seen a strong recovery back to $135.
That’s a gain of 56%, and enough to turn a £10,000 investment into a whopping £15,600.
The lesson we can learn is not that we should try to time the bottom when investing in a stock. No, it’s that we can use short-term shocks and bad news to our advantage.
Panic over
The triggers for both the fall and the subsequent rise stemmed from one person, US President Donald Trump.
The global trade strife he kicked off with his now-infamous tariffs announcement on 2 April hammered tech stocks that were already depressed by semiconductor export restrictions.
China, so far, has been the key competitor to the US in the rush for artificial intelligence (AI) domination. Denying Chinese firms access to the lastest AI chips, like Nvidia’s powerful Blackwell processors, is intended to hold them back. But it doesn’t exactly help Nvidia’s export growth ambitions.
But the worldwide AI balance could be shifting after the president’s visit to the Middle East, and Saudi Arabia’s latest technology announcement.
Enter Humain
Nvidia and Advanced Micro Devices have partnered with Saudi Arabia’s Humain AI data centre project. The idea is to build AI factories with a projected capacity of up to 500 megawatts over the next five years.
Estimates put the total demand for Nvidia processors at several hundred thousand. And it will start with a first shipment of 18,000 of the latest-generation Blackwell chips.
The Nvidia stock price spiked up in response. And it’s up 16% in the past three days alone. It seems rumours of the demise of US AI chip dominance had been somewhat exaggerated. But that often happens with stock market panics.
History
What happens with all the stock market dips throughout history? That’s right, prices tend to recover every time.
Some bad times have needed longer to recover from, but most bear markets have been short. And a study by Barclays shows that over 18-year rolling periods, cash in savings has never once beaten UK stocks in more than 125 years.
That includes the great depression of the 1930s when stockbrokers were allegedly throwing themselves out of tall buildings. Oh, and two world wars. Compared to those, the tariff dip seemed like barely enough time to pop out for lunch.
Nvidia now
What should we do about Nvidia stock now? The same as with any stock, surely. We should examine its long-term outlook. Then see how the current valuation compares to those expectations. And if we think it looks good value, we should consider buying.
I see solid earnings growth in the forecasts, even if they might be a bit out of date. There’s a forward price-to-earnings (P/E) ratio of 32, dropping to 25 by 2027. And a consensus buy with an average $163 price target. I reckon not considering Nvidia now could turn out to be a mistake.
