Is Nvidia a Buy Right Now?

The stakes are high this earnings season. Investors are paying close attention to how changes in the debt markets and capital expenditures might impact the artificial intelligence (AI) trade.

Fears about a possible slowdown in the AI build-out have already stoked a broad sell-off across AI infrastructure stocks, including data center GPU kingpin Nvidia (NASDAQ: NVDA), which now sits about 15% below its all-time high.

With Nvidia set to report earnings on Nov. 17, all of this puts investors in an interesting position. Is Nvidia stock a buy right now? Here's what matters as we approach a very important earnings report.

The pressure is starting to build even more

At this point, Nvidia is probably used to the pressure of being the face of the AI infrastructure trade. But as speculation rises over whether funding will dry up for companies building all these data centers -- you know, Nvidia's customers -- the pressure is going to turn up even more.

Image source: The Motley Fool.

Nvidia guided for $108 billion in third-quarter revenue, implying 106% year-over-year growth.

Consider what it would look like if Nvidia's Q3 sales come in softer than Wall Street expects. It could easily lend credibility to the notion that the infrastructure trade has peaked, which would require investors to more closely scrutinize the sector's growth expectations.

Nvidia's valuation has a buffer against slowing growth

Right now, Nvidia trades at approximately 23 times this year's estimated earnings. Several years of explosive growth have set a high bar for the company. Analysts have routinely posited that Nvidia would deliver long-term annualized earnings growth as high as 40% to 50%.

Buying the stock here at 23 times earnings would probably look like a no-brainer in hindsight if the company actually grows that quickly. And it might. But analysts have begun to lower their expectations as concerns about the state of the infrastructure trade rise.

Some analysts now expect Nvidia's earnings to grow at 14% annually over the next three to five years. That would clearly be a major slowdown. The good news for investors is that Nvidia at 23 times earnings is still arguably a solid buy at that growth rate.

Zooming out can help investors see the big picture

It's anyone's guess where Nvidia's numbers will land when earnings drop, and nobody can know how the market might react. Time is a long-term investor's greatest advantage, though, so don't be afraid to wield it.

Even if the data center boom slows or unwinds, it seems evident that the AI trend is moving forward rather than backward. The early years of the internet generated a stock market bubble that eventually burst, yet years later, the internet remains the foundation of the modern global economy.

Meta Platforms' recently introduced Muse agentic AI app, which is growing its user base at a breakneck pace, is only the latest stepping stone on the path toward a society where AI is broadly used. One can look ahead to a future where vast numbers of AI agents are constantly active, working and transacting on behalf of humans. That doesn't even get to adjacent AI industries such as humanoid robotics.

As long as Nvidia's GPUs remain the primary parallel processors of choice in AI data centers, the company has a path to growth over the coming years as models and the chips that power them improve, and more people use AI in more ways, even if the current data center cycle cools off.

Is the stock a buy right now?

If you agree that AI is here to stay, it's hard not to like Nvidia at its current price. Its valuation is reasonable, even assuming Nvidia grows far more slowly over the coming years than it has over the past few.

That doesn't mean the stock can't sink if the AI infrastructure trade deteriorates.

Therefore, it would probably be wise to maintain a diverse portfolio and keep some extra cash handy should the market offer Nvidia and other leading AI stocks at more compelling prices in the future.

Justin Pope has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.