Nvidia stock selloff: Is it time to buy this artificial intelligence (AI) stalwart?

Amid a market selloff centered on large tech stocks, Nvidia (NVDA 4.08%) he had a rough month. Since hitting $135 a share in early July, the stock has sold off massively and now sits at just under $100 a share. That’s down nearly 30% from its high, indicating that Nvidia stock is in its own bear market.

While this may cause some investors to panic, it may give other investors a chance to buy the stock at a discount after missing out on the initial rally. So is Nvidia stock a buy here? Or is this a reasonable price correction?

Two long-term non-factors are weighing on Nvidia stock

The broader stock market sell-off is loosely attributed to a trading strategy that led investors to borrow the Japanese yen at low interest rates and then use that money to invest in some of the most dominant technology stocks in the US market ( such as Nvidia). Now that Japan has signaled that it is tightening interest rates, anyone doing so is selling their stocks to recoup the money before higher interest rates kick in.

In addition, there is some fear that the US Federal Reserve is asleep at the wheel and should cut interest rates. With unemployment steadily rising, many are concerned that we are actually in the early stages of a recession.

These prevailing headwinds aren’t doing Nvidia investors any favors, but they do allow long-term investors to add more at a bargain price. These factors will not stop the proliferation of artificial intelligence (AI), so it does not make sense to include them in the long-term investment thesis.

As Nvidia is the leading supplier of graphics processing units (GPUs) that provide the computing power needed to train AI models, it has benefited greatly over the past year and a half as the AI ​​arms race heats up. This is not expected to slow down anytime soon, and investors should focus on the development of AI infrastructure.

However, is the selloff deep enough to warrant buying Nvidia stock?

Nvidia stock is now in the buy zone

Valuing Nvidia stock is incredibly difficult because of its rapid growth and transformation. The best way to value it is by using the forward price-to-earnings (P/E) method, which uses analysts’ earnings projections over the next 12 months to value the stock. Although this method is not perfect, it is the best way to evaluate Nvidia.

Thanks to the sale, Nvidia trades for a more expensive but much more reasonable 36 times forward earnings.

NVDA PE Ratio data (before) by YCharts.

While that only resets the valuation to late May levels (prior to its first-quarter earnings report), it’s still not a bad price. Since his big tech peers like it Amazon, Appleand Microsoft they’re not much cheaper than Nvidia, trading for 35, 31 and 30 times forward earnings, respectively. Plus they don’t have anywhere near the growth potential, it’s starting to look like Nvidia might be worth buying.

If you’re planning to buy Nvidia stock, it’s probably best to do so before August 28. Then Nvidia reports Q2 earnings for FY 2025, and Nvidia stock has come up after almost every earnings report dating back to Q1 FY 2024. I’d be surprised if anything Nvidia says in the earnings report will send the stock down because all the language of at cloud computing providers and every other company investing heavily in AI servers has said they will spend more in the coming year.

This is great news for Nvidia and a fantastic reason to buy the stock now amid the market selloff.