Nvidia stock dropped (again) today and is now 20% off its high. Is the stock still a buy?

Nvidia (NVDA -7.42%) the stock started in september not with a bang but with a whimper. Late last week, the company reported results for its fiscal second quarter 2025 (ended July 28), and while the results were better than expected, they weren’t as robust as some investors had hoped.

The stock was under pressure again on Tuesday, falling as much as 8.4%. As of 12:27 PM ET, the stock was down another 7.8%.

Despite continuing uncertainties, investors should take a step back and look at the bigger picture.

The forest for the trees

Some investors have become angry about Nvidia stock in recent weeks, and it’s easy to see why. After five consecutive quarters of triple-digit year-over-year growth, management is forecasting a moderate deceleration, guiding for 80% revenue growth in the third quarter. Sure, it’s slower than it used to be, but it’s still an enviable increase.

Another issue weighing on investor sentiment is Nvidia’s declining gross margin of 75.1%. While that’s up from 70.1% in the year-ago quarter, it’s down from 78.4% in the first quarter. Some investors fear this could be the start of a new trend, but that conclusion is premature. Nvidia is scheduled to start shipping its next-generation Blackwell artificial intelligence (AI) processors later this year, and previous new product launches have improved margins. This time will likely be no different.

Finally, stories emerged over the weekend of a fight between China and Japan over sanctions on advanced chip-making equipment, with the former threatening “economic retaliation,” according to a Bloomberg report. This disagreement could spill over into the wider AI sector, but it’s simply too early to tell.

Taking a step back

Thanks to the growing adoption of AI, Nvidia stock has gained more than 650% since the start of last year (as of this writing) and seen a commensurate jump in valuation, currently trading at around 38 times sales at term. While that’s certainly a premium, Nvidia’s track record shows it’s worth paying.

It’s still early days for the adoption of generative AI, a market estimated to be worth $1.3 trillion by 2032, according to Bloomberg Intelligence. This shows that Nvidia still has plenty of time to continue to take advantage of this emerging opportunity.

That’s why Nvidia stock is a buy.