Nvidia Stock Rallied (Again) Today, but Is Still 10% Off Its All-Time High. Is the Stock Still a Buy?

Nvidia (NASDAQ: NVDA) has been on an epic roller-coaster ride in recent months. After taking a beating over the summer and losing more than a quarter of its value, the stock has mounted an impressive recovery and now sits roughly 10% off its all-time high (as of this writing).

Comments made by CEO Jensen Huang helped fuel its rise today, as the stock gained 3.1% as of 2 p.m. ET.

Despite the volatility, investors should keep their eyes on the prize.

Taking a step back

Nvidia has become something of a battleground stock in recent months and both sides have valid points. Management's most recent forecast calls for sales growth of 80% for the current quarter. While that's a deceleration of the triple-digit growth that captured headlines over the past year, it's still impressive nonetheless.

Bears also point to the company's gross margin of 75.1% in its fiscal 2025 second quarter (ended July 28), noting a decline from 78.4% in Q1. Given that it was a record performance, it's best viewed in that context.

Management noted gross margin was down sequentially due to product mix and inventory provisions for its next-generation Blackwell AI processors, which are scheduled to begin shipping in Q4. Historically, new products have carried a higher margin profile, which could send gross profits higher. Furthermore, in an interview yesterday, CEO Jensen Huang noted that demand for the Blackwell processors was "insane."

Finally, bears point to Nvidia's lofty valuation, and at 58 times earnings, it's easy to see their point. However, analysts' consensus estimates are calling for Nvidia to generate earnings per share of $4.02 in its fiscal 2026 (which begins in January). That works out to less than 30 times next year's expected earnings, which is comparable to a price-to-earnings (P/E) ratio of 30 for the S&P 500.

We're still in the early innings of generative AI adoption. Some experts estimate the market will be worth $1.3 trillion by 2032, according to Bloomberg Intelligence. As a company at the forefront of the AI revolution, Nvidia still has plenty of upside ahead. That's why the stock is still a buy.

Should you invest $1,000 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 Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $728,325!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.