Nvidia shares are down 10% from their peak. Is this the time to buy at a low?

Nvidia‘S (NASDAQ: NVDA) The stock hasn’t been on sale much, but when it fell slightly from 2023 onwards, it became an obvious buying opportunity for investors. While investors may have missed the bottom of the decline when it fell about 25%, is a 10% discount still a good enough price to pay?

Nvidia stock is down 10% from its June high. If you’re considering Nvidia stock now, are you buying it for the 10% return or looking for something even bigger?

The next quarter looks set to be another good one for Nvidia

Nvidia has been the talk of the investment world for almost two years now. Its graphics processing units (GPUs) are used by those looking for the ultimate in computing performance. These GPUs have been used almost exclusively by some of the world’s greatest artificial intelligence (AI) researchers, which has fueled a boom in Nvidia’s business.

Demand for its GPUs continues to grow. In the second quarter of fiscal 2023 (ending July 31, 2022), Nvidia had revenue of $6.7 billion. In the second quarter of fiscal 2024 (ending July 30, 2023), it was $13.5 billion. Most recently, in the second quarter of fiscal 2025 (ending July 28), it was $30 billion. It’s rare for a company to increase its revenue by more than fourfold in just two years, let alone do it on Nvidia’s scale. However, its streak is expected to continue, as management has forecast revenue of $32.5 billion in the third quarter.

It’s clear that demand for Nvidia GPUs has not been met, so buying during this period seems like a sensible solution, at least in the short term.

Nvidia’s Profit Forecasts Seem Achievable

Looking ahead, we can use Nvidia’s projected price-to-earnings (P/E) ratio and compare it to the previous P/E ratio to get an idea of ​​how much growth Wall Street has already invested in the stock.

NVDA PE Ratio Data by YCharts

At 56 times prior period earnings and 42 times forward earnings, Nvidia needs to see 33% earnings growth over the next year to reach that valuation. When you look at Q2 earnings per share growth of 168%, you’d probably be tempted to think that this would be an easy feat. But there’s more to the story.

Nvidia’s margins have risen significantly as demand for its GPUs has surged.

NVDA Gross Profit Margin (Quartery) data by YCharts

Starting in Q3, we will be directly comparing Nvidia’s high profit margins to each other year over year. Nvidia’s profit growth will continue to be impressive, but it will not exceed 100% year over year.

As a result, profit growth will be more closely linked to revenue growth, but given the expected 80% growth, the result will still be very impressive.

Considering that the company’s revenue is expected to grow by around 80% in the third quarter, I would say that Nvidia is on the right track in the medium term as well.

Long-term demand for GPUs will remain high

Finally comes the hardest part of the projection, the long-term one. If you believe that AI growth will continue, you expect AI to play a big role in our daily lives. The question is how much computing power it will require.

Once the big AI developers build enough processing power to process all the AI ​​training they want, Nvidia’s sales will likely take a big hit. But when that happens is anyone’s guess. It could be decades away or just around the corner. Given that the initial stages of AI adoption and training are just beginning, I suspect it will be a while before Nvidia starts having problems.

Given that Nvidia meets all three criteria over time, I think investors can confidently buy Nvidia stock when the stock price falls.

Is it worth investing $1000 in Nvidia now?

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Keithen Drury has no position in any stocks mentioned. The Motley Fool has a position in Nvidia and recommends it. The Motley Fool has a disclosure policy.