Nvidia: 1 stellar reason to buy its latest dive

Remember when Nvidia (NVDA -6.39%) did the company only make graphics cards for gamers? Those days are long gone. Riding the wave of artificial intelligence (AI), Nvidia has become the backbone of this booming industry. Its graphics processing units (GPUs), once the darlings of the gaming world, now power the massive data centers driving the AI ​​boom. That pivot has sent Nvidia shares soaring over the past two years, catapulting the company into the ranks of the world’s most valuable businesses.

But even tech buffs aren’t immune to market turmoil. August has been a rough month for Nvidia stock, with the stock taking a few dips as investors grapple with its skyrocketing valuation. The company reported fiscal second-quarter 2025 results after the market closed on Wednesday, and shares were down about 4% as of 1:30 p.m. Thursday.

Amidst this turmoil, however, one compelling reason stands out why this latest dip could just be a golden opportunity for investors. Let’s delve into Nvidia’s recent rollercoaster ride and discover why its actions speak volumes for its prospects.

Image source: Getty Images.

Market turbulence

Trading at about 34 times estimated fiscal 2027 earnings, some investors are scratching their heads, wondering if Nvidia’s growth can justify its high price. Long and short? Nvidia stock is priced as if its dominance in AI-capable chips will last another decade, with demand remaining in the red all the while.

But here’s the bottom line: Nvidia’s recent growth is absolutely amazing. Data center revenue has skyrocketed from $3.6 billion in Q4 fiscal 2023 to $26.3 billion in Q2 fiscal 2025. This explosive growth stems from an insatiable appetite for intelligent data centers artificial like the technology leaders Microsoft and OpenAI is steadily marching towards general artificial intelligence.

Optimistic signals from within

As the market gets choppy, Nvidia’s management team is doubling down with a massive vote of confidence. They’re buying back shares like there’s no tomorrow and don’t plan to put on the brakes anytime soon, despite the stock’s rich valuation.

In the second quarter of fiscal 2025, Nvidia spent $7.2 billion on share buybacks. To put that into perspective, it only distributed $246 million in dividends over the same period.

But wait, there’s more: The board approved another $50 billion in stock buybacks on August 26, 2024, with no expiration date. That’s a strong vote of confidence by any measure.

Future perspectives

The Nvidia card isn’t just shooting arrows in the dark here. Their next-generation GPU, codenamed Blackwell, is shaping up to be a cash cow. The company projects “several billion” in Blackwell’s revenue for the fourth quarter of fiscal 2025. This forecast underscores relentless demand for Nvidia’s cutting-edge AI technology.

Of course, not everyone is full of optimism. Some industry experts are raising eyebrows about the sustainability of this rocket growth. He wonders if Nvidia’s big-name customers — like Microsoft, Amazon, Metaand Alphabet — will continue to invest money in AI without seeing immediate return on capital.

The AI ​​spending debate

Skepticism doesn’t just come from armchair critics. MIT economist Daron Acemoglu is just one person who questions whether AI can deliver significant returns on capital in the short term, despite massive investments from these tech giants.

But most of these dissenting voices come from outer Silicon Valley. Within it, confidence in AI’s immediate potential remains unwavering.

For insiders, Nvidia stock remains the hottest ticket in town. And the numbers back it up: expected revenue of $32.5 billion for the current quarter, a staggering 79% year-over-year growth.

Why am I impressed?

The company’s consistent innovation, iron grip on the market, and management’s unwavering confidence paint a pretty rosy picture for the stock’s future. The cherry on top: Nvidia’s aggressive share buybacks provide a compelling reason to consider picking up the stock during this latest dip.

The main argument against Nvidia seems to be that AI is hype and the party is about to end. But AI is already making waves in the real world, and this is just the tip of the iceberg.

I predict that the next few years will see AI-powered medical facilities, autonomous cars, and a whole host of game-changing technologies. So while a healthy dose of skepticism is always good, the facts on the ground tell a dramatically different story.