Five reasons to remain bullish on Nvidia (NVDA) stock after recent corrections

Nvidia’s ( NVDA ) ultra-bullish streak in the first half of the year has been broken, with the stock failing to make new highs over the past few months. Following its highly-anticipated second-quarter earnings report in late August, Nvidia stock saw a pullback due to high investor expectations for hypergrowth despite the strong results it posted. I think this price correction presents a compelling opportunity. In this article, I’ll highlight five reasons for my bullish view on Nvidia, focusing on strong revenue growth (despite some tough compounds), AI dominance, valuation, technical indicators, and Wall Street analyst consensus.

Let’s dive in.

1. Nvidia’s strong revenue growth despite tough comparisons

The first point supporting an extended bullish case for Nvidia is the solid revenue growth shown in its Q2 results despite challenging comparisons.

Nvidia posted 122% year-over-year growth in its most recent quarter, hitting $30 billion in revenue — a remarkable achievement given the company’s already substantial revenue base. While this growth rate is lower than the 200% growth in the previous quarter, the absolute triple-digit growth remains impressive. This underscores Nvidia’s ability to grow its revenue significantly, even when compared to past performance.

While the drop in stock after Q2 can be attributed to expectations being set too high, it’s important to note that Nvidia continues to deliver sequential quarterly revenue growth, signaling robust demand for its products, particularly in AI and data centers . This level of sustained growth at such a large scale highlights Nvidia’s ability to capture market share and drive long-term revenue growth. Nvidia’s Q3 sales guidance of $32.5 billion further reflects the company’s confidence in maintaining its growth trajectory.

2. Nvidia’s dominance in the AI ​​and data center market

The second bright spot is Nvidia’s continued dominance in the data center GPU space, where it holds a 98 percent market share in this fast-growing sector, according to the data. HPCwire.

Demand for AI-based solutions is booming across industries, with Nvidia’s H100 Hopper GPU becoming crucial for enterprise cloud applications that require massive computing power. Beyond hardware, Nvidia dominates AI through its software ecosystem, including CUDA and cuDNN, providing a comprehensive AI solution. As outlined in Nvidia’s earnings call, the company aims to transform the $1 trillion data center market by moving from traditional computing to accelerated computing using advanced data processing libraries.

Looking ahead, Nvidia plans to launch its Blackwell architecture in Q4 fiscal 2025, offering greater power and efficiency than the Hopper. Designed to meet the requirements of hyperscalers and AI developers, Blackwell will offer end-to-end solutions including chips, systems, networking and software. This release is a key catalyst that will further strengthen Nvidia’s leadership in AI.

3. Nvidia looks attractively priced when adjusted for growth

The third point concerns Nvidia’s ratings. At first glance, its P/E ratio of 54.7x and straight P/E of 42.5x may seem high, especially compared to the semiconductor industry average of 23.7x. However, my bullish stance is bolstered by Nvidia’s growth prospects, with the company expected to deliver 106% revenue growth and 119% EPS growth this year.

Additionally, analysts expect Nvidia’s EPS to grow at a CAGR of 36.6% over the next three to five years. This impressive growth rate, combined with the current forward P/E, results in a reasonable forward price-earnings-growth (PEG) ratio of 1.16.

Undervalued stocks traditionally have a PEG ratio below one, however NVIDIA’s PEG ratio is more favorable than that of all other stocks in the Magnificent 7. Among this group, Alphabet ( GOOGL ) and Meta ( META ) have the next lowest PEG ratios to 1.28 and 1.48, respectively. While this doesn’t necessarily mean NVIDIA is undervalued compared to its Big Tech peers, it does suggest that at this value, the stock doesn’t look overpriced.

4. NVDA’s moving averages suggest a bullish trend

The fourth point that reinforces the bullish thesis is closely related to the sentiment surrounding Nvidia’s stock performance. Despite recent fluctuations, the company’s triple-digit revenue growth indicates that it is still in a hyper-growth phase. However, with a staggering 2,700% rise in share price over the past five years, concerns about a potential bubble remain.

In this context, I believe that a focus on long-term mobile media is essential to gauge momentum. This provides a clearer picture of Nvidia’s trend amid daily volatility, especially given the stock’s 48% annualized volatility. The uptrend in NVDA stock is supported by a current price trading above its 200-day moving average of $92.80.

5. Wall Street remains mostly bullish on NVDA

Finally, the fifth point that contributes to my favorable outlook for Nvidia is the overwhelmingly bullish consensus among Wall Street analysts. Of the 42 analysts covering the stock, 39 have issued a buy recommendation, while the remaining three have a hold rating. Furthermore, the average price target among these analysts is $152.44, indicating a potential upside of nearly 25%.

One standout is Rosenblatt analyst Hans Mosesmann, who has Wall Street’s highest price target for Nvidia at $200 a share. His optimism persisted after Q2 results, which he saw as strong, driven by Hopper AI and Networks growth. Although gross margins have fallen slightly due to Blackwell chip upgrades aimed at improving yields, Mosesmann remains confident. He points out that despite potential near-term share price weakness, bullish sentiment is supported by a P/E multiple of 44x based on fiscal 2027 EPS.

Conclusion

In this article, I outlined five key points that support my Buy position on Nvidia. I believe the stock’s recent weakness presents an attractive buying opportunity for investors looking to capitalize on its strong growth trajectory.

While some short-term hiccups may persist, Nvidia’s second-quarter results suggest its growth story will continue robustly as the company consolidates its market dominance and prepares for the upcoming launch of its Blackwell architecture. Given the potential for further growth in the coming years, the current rich valuation may be justified, and Wall Street believes so.

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