Nvidia (NASDAQ: NVDA) isn’t flying as high as it once was. The GPU stock remains below its peak set in early May. Nvidia briefly lost its position as the world’s largest company by market cap to Apple (NASDAQ: AAPL), but regained the top spot.
Is Nvidia’s stock still a buy after its latest pullback? If you believe Dan Ives, partner and senior managing director at merchant bank Yorkville Ives, the answer is a resounding “yes.”
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Early in the game
Ives said in a recent interview with CNBC, “We’re in the third inning of the AI revolution.” Any baseball fan knows that means it’s still early in the game. Ives added, “There’s one chip in the world fueling the AI revolution, and that’s Nvidia.”
Using the third inning in the baseball metaphor might actually be too pessimistic. Ives told CNBC, “We’re only 15% through what the broader spending is going to be in terms of AI.” If that percentage is correct, the AI revolution could be only in its first inning.
Is Ives right about the status of the AI market? I think so.
Agentic AI adoption remains in its early stages. Physical AI (AI that operates in the real world rather than only on a screen) is definitely in its infancy. Meanwhile, multiple companies are scrambling to develop artificial general intelligence (AGI) and artificial superintelligence (ASI). AGI would match human capabilities, while ASI would exceed them.
As for Ives’ take on Nvidia’s role in the AI revolution, he’s exaggerating somewhat by calling the company’s GPUs the “one chip” driving AI advances. Other tech giants have also developed widely used AI chips. However, Ives is correct that Nvidia is the clear leader in the AI chip market, with no end in sight to its dominance.
Buy Nvidia’s pullback?
Is Nvidia a no-brainer stock to buy on the pullback if everything Ives said is true? Not necessarily. Some might think Nvidia’s growth prospects are already largely baked into the share price.
However, I don’t think that’s the case. Nvidia’s forward price-to-earnings ratio is 22.9, the second-lowest among the so-called “Magnificent Seven” stocks. Its price-to-earnings-to-growth (PEG) ratio, which is based on Wall Street’s five-year earnings projections, is a super-low 0.55.
Ives noted that the demand for Nvidia’s GPUs today outstrips supply by 12-to-1. That could change as rivals improve their chips’ capabilities and cost-effectiveness. Maybe the AI boom will lose some of its steam as well. Still, I don’t expect Nvidia to lose its market-leading position anytime soon.
