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Should you buy Nvidia stock now or wait for a dip?

Nvidia (NASDAQ: NVDA) has been a growth machine lately. Turnover and profit are skyrocketing. The chipmaker has become synonymous with artificial intelligence (AI). The powerful chips to power this AI’s compute-intensive systems are in high demand, and have become critical to many companies. The downside for investors may be that the stock has already generated such impressive returns that it may be too late to benefit much from the growth.

The stock is up more than 220% in the past year and the company’s market cap now exceeds $2 trillion. Some investors are now wondering whether they would be better off waiting for a dip in Nvidia’s share price. Or should they add shares now?

The bullish case for Nvidia

As expensive as Nvidia’s stock is, its huge potential in AI suggests investors should remain bullish on it as an investment. The technology is still in its early stages and companies have only just started developing AI models. According to a recent prediction by Gartnerthe global AI chip market will rise to $119.4 billion by 2027, more than double what it was worth in 2023.

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Nvidia, a dominant industry player and supplier of AI chips, will stand to benefit from this growth. In the company’s most recent fiscal year, which ended Jan. 28, revenue grew 126% to just under $61 billion, and net income was almost half of that, around $30 billion.

As demand for AI chips grows, it’s easy to see a path where Nvidia’s revenues can continue to grow, making its current valuation less problematic for long-term buy-and-hold investors.

The bearish case for Nvidia

The biggest concern with these AI developments is that reality will not match the hype. OpenAI CEO Sam Altman has stated that when it comes to what AI can do, “people are begging to be disappointed, and they will be.” While it can increase productivity, the technology’s potential, at least in the short term, may be oversold.

In the meantime, investors in many companies are paying for these sky-high expectations. Nvidia’s valuation may seem relatively reasonable when you look at its price-to-earnings growth ratio, which is around 1.2, but that still implies a high level of earnings growth over the next five years. If these assumptions prove too optimistic, it could leave AI stock vulnerable to a sell-off.

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Moreover, there is always the risk of a recession. While there is talk of a possible soft landing for the US economy, if it performs worse than expected, companies may scale back their AI-related investments and spending, especially if the gains they see from it are not immediate or impactful enough.

Should you invest in Nvidia stock?

Nvidia is a leading AI company and it could be a great way to invest in technology. But investors should consider its valuation and what assumptions they’re relying on when looking at its price tag. If you are optimistic about AI and believe it will be a game changer for industries and businesses around the world, then it is certainly not too late to invest in Nvidia given its dominant presence in the space and future growth opportunities.

Trying to time the market and wait for a dip in Nvidia stock may not be ideal, as there’s a good chance the stock won’t drop significantly unless there’s a broader market sell-off related to the economy, which would mean that growth prospects have declined. has taken a major hit, in which case the entire investment thesis in the stock could also change. So as long as you’re bullish on AI, Nvidia could still be a good buy right now.

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Should You Invest $1,000 in Nvidia Now?

Consider the following before buying shares in Nvidia:

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

Should you buy Nvidia stock now or wait for a dip? was originally published by The Motley Fool

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