Read This Before You Buy Nvidia

Shah Gilani|August 30, 2024

Four weeks ago, Goldman Sachs analyst Scott Rubner called Nvidia (NVDA) the most important stock of 2024 and advised clients to buy the dip.

He wasn’t wrong… about buying the dip.

As for his assertion that Nvidia is the most important stock of 2024?

Well, the markets had something to say about that this week.

Stocks floundered early this week ahead of Nvidia’s earnings at the close Wednesday.

Their action seemed to prove how significant Nvidia is… or can be.

But the market’s reaction on Thursday to the company’s earnings said otherwise.

So, which is it?

Here’s what I think… and what you should do about it.

No Doubt

There’s no doubt Nvidia is an important stock. It’s the bellwether for the AI narrative… the story that AI is already changing the world and will change earnings and profitability for lots of companies.

Nvidia’s semiconductors are considered the most architecturally advanced chips on the market. The chips are preferred by everyone who can get their hands on them for their AI buildouts.

But Nvidia’s chips aren’t the only thing in demand. Its stock’s performance has been spectacular for a few years now. It has doubled… tripled… and quadrupled to the point where it’s one of the most valuable companies in the world. Nvidia now sports a market cap of just under $3 trillion. (It was well above $3 trillion back in June.)

The angst over Nvidia’s earnings this week – what impact the numbers and the stock’s movement post-earnings would have on the rest of the market – was palpable and proved to be market moving. In the afterhours trading on Wednesday, Nvidia was down 5% and S&P 500 futures traded lower in sympathy.

But that was Wednesday, after the close.

Thursday morning futures looked stronger as Nvidia’s stock continued to trade down.

Then the markets opened. And the feared takedown of benchmarks didn’t happen.

By Thursday’s close, Nvidia was down $8.02 per share, or 6.38%. That lopped off nearly $280 billion of its market cap. Yet the S&P 500, where Nvidia has a cap weighting of nearly 6.7%, closed almost unchanged.

The Nasdaq Composite, where Nvidia’s cap weight is nearly 5%, closed down only 0.23%. And the Nasdaq 100, where Nvidia’s weight is a strong 8.25%, closed down only 0.15%.

So much for market-moving significance.

To the Future

This week’s activity aside… the company and the stock are important, not just to the AI narrative, but to your financial future and mine.

We own shares in my Manward Money Report newsletter. I’m buying the stock on dips.

If you don’t own Nvidia… you should seriously consider allocating some capital to it.

The company is that important to all things AI now and in the future. And the stock will reflect that importance by continuing to rise.

After all… the company’s earnings were excellent, again. They beat on the top line and the bottom line, again.

The problem traders and some investors had was with revenue growth. It was up “only” 122% year over year. That worried traders because the previous quarter’s revenue growth was 200% better year over year. And the quarter before that revenue growth was up 300% year over year.

The trend scared traders into selling.

As I write on Friday morning, Nvidia is up 2%. Where the stock (and the market) ends the day is anybody’s guess.

But I’m not guessing when I say buying this dip in Nvidia… or any big dip we get in the stock… will be one of the best moves you can make for your future.

Nvidia’s cheap on a P/E basis. It’s trading with a forward P/E of only 44. For the kind of earnings growth Nvidia’s seen and will continue to see for years to come… that’s cheap.

Tesla traded at nearly a triple-digit P/E years before it turned a profit. Nvidia is growing its profits almost exponentially.

Scott Rubner was right… but I’m more convinced Nvidia is an important stock to own, not just in 2024, but for the foreseeable future.