1 Reason Nvidia Is a Screaming Buy in October, and 1 Reason Investors Should Be Cautious
Key Points
Despite their stunning growth, Nvidia shares trade at less than 25 times forward earnings estimates.
The principal unknown variable is the durability of the AI data center build-out.
- 10 stocks we like better than Nvidia ›
Nvidia (NASDAQ: NVDA) shares have risen by 29% in 2026 (as of Oct. 5). This continues a monster winning streak that has seen the shares increase by more than 1,110% over the past five years, catapulting the business to a $5.8 trillion market capitalization.
There's one obvious reason this artificial intelligence (AI) stock is a screaming buy in October. There's also one reason to be wary.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: The Motley Fool.
Valuation is one reason why Nvidia looks like a no-brainer buying opportunity this month. Shares currently trade at a forward price-to-earnings ratio of 24.9. This is what the market is asking you to pay for a dominant business that posted year-over-year revenue and net income growth of 106% and 126%, respectively, in the most recent fiscal quarter (Q2 2027 ended July 26).
The ongoing AI build-out, measured by the five big hyperscalers on track to easily exceed $1 trillion in capital expenditures in 2027, is unprecedented. Nvidia has gained the most financially from this surge in spending.
It's also wise for investors to be a bit cautious, however. No one has the slightest idea about how long this AI build-out boom will last. Durability is the biggest unknown variable. If the hyperscalers don't see adequate returns on invested capital, the impact will be felt up the value chain. Demand for Nvidia's graphics processing units would be under pressure, which would adversely affect the stock price.
The market isn't forgiving when it comes to decelerating growth trends.
Should you buy stock in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $370,440!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,470,022!*
Now, it’s worth noting Stock Advisor’s total average return is 955% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of October 8, 2026.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Recommended Articles
