It’s a Good Time to Buy Nvidia
As I look for places to put cash, here's why the mighty Nvidia seems like a safe bet.
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The market is struggling to start the week as concerns about a trade deal with China are flaring up, and some soft economic data is hitting. Construction spending came in at a drop of 0.4% rather than an expected rise of 0.2%.
There isn’t any startingly bad news, but the market has been struggling to gain upside traction recently, and momentum is lacking. There isn’t a lot of motivation to put new capital to work
I continue to look for new places to put cash, and one name that looks like a safe bet is the mighty Nvidia NVDA. Nvidia is the driving force behind the infrastructure needed for AI. It dominates the semiconductor market and is at the cutting edge of innovation.
Nvidia posted another robust earnings report on May 28, but after gapping higher on the news, it has fallen back and closed that gap. There is a cup-with-handle pattern forming, and that is a good setup for a pop higher on any positive news about tariffs or trades. It has already priced in increased restrictions on shipment of chips to China, and it still has stupendous demand for its products.
Nvidia expects to grow EPS to $4.37 in the fiscal year ending January 2026, which is growth of 46%, and then an additional 31% in FY 2027. The stock trades with a trailing P/E of 42, which makes it the cheapest of the Magnificent Seven names on a PE/Growth basis.
The semiconductor sector is generally viewed as cyclical, which is why it has cheaper valuations, but there are many indications that the the current AI cycle is still at a fairly early stage. Nvidia is not a stock that is at a cyclical peak at this time.
There are 41 analysts following Nvidia, with 36 buys, four holds, and one sell. The average price target is $171.62, which is 27% higher than the current price. The high target is $210 from Truist. Following the most recent earnings report, numerous analysts raised their price targets.
My game plan for NVDA is to start a small position around the recent price of $135 and then look to average in on weakness. If it moves back up the $140 level, I’ll look to be more aggressive for a breakout play. I view bad news as an opportunity to buy the stock because in the longer run, when all the tariff and trade issues are resolved, it is still going to be a leader with hypergrowth.
At the time of publication, Rev Shark was long NVDA.
