Nvidia Stock is Down Over 20% From Highs. Should You Buy?

Shares of Nvidia (NASDAQ: NVDA) are trading over 13% year-to-end and roughly 22% off the all-time high set in December.

The giant chipmaker has seen its shares slide following a major selloff in equity as the Fed starts its tightening process. Given the magnitude of this selloff, with Nvidia shares trading 36% off the highs at one moment, the question arises is it now a good moment to buy Nvidia stock?

In March, the company held its much-anticipated Analyst Day where it presented new products and discussed future plans.

GTC

Nvidia CEO Jensen Huang laid out the company’s future roadmap and introduced several new product developments at Nvidia’s GPU Technology Conference 2022 (GTC).

Huang made several significant announcements, one of which is the new NVIDIA Hopper H100 Systems – a new powerful GPU architecture to replace the current Ampere architecture.

The chip offers a considerable processing capability, however, users can link multiple H100 GPUs via NVLink interconnect to create a single huge GPU with an outstanding 4.9 Tbps of external bandwidth.

The new GPU is expected to hit the market in a format developed for servers first before Nvidia launches other formats.

The GTC 2022 marks the first significant event for Nvidia since the world’s largest GPU manufacturer dropped plans to buy a chipmaker Arm from SoftBank Group after regulators raised concerns over the $40 billion deal.

However, Nvidia’s plans did not change much after the unsuccessful Arm deal. Huang also unveiled a new “superchip” that combines two of its previously-announced Grace CPU units into a single unit.

Nvidia plans to launch Hopper H100 in the third quarter, with the company saying the chip will be used by the largest cloud providers in the United States and China, including Amazon Web Services, Microsoft Azure, Google Cloud, Tencent Cloud, Alibaba Cloud, and others. Furthermore, server manufacturing companies such as Dell Technologies and Cisco Systems will launch servers powered by the H100 accelerators, said Nvidia.

Among other highlights of the event, Nvidia also announced Omniverse Cloud, a cloud version of its powerful Omniverse collaboration and simulation engine, used by designers and engineers to build 3D virtual environments.

With the cloud version, anyone with an internet connection will be able to use Omniverse, without the need for a highly-powerful computing device.
Recent Financial Results
In February, Nvidia reported better-than-expected Q4 2021 financial results.

The company reported an adjusted EPS of $1.32, beating the consensus projection of $1.22 per share. Revenue in the quarter stood at $7.64 billion, above the analyst expectations of $7.42 billion and up 53% from the year-ago quarter.

Data center generated a revenue of $3.26 billion, up 72% YoY and above the analyst consensus of $3.15 billion. Gaming revenue came in at $3.42 billion, up 37% YoY, and topping the estimated $3.36 billion.

Adjusted gross margin in the quarter was 67%, up from 65.5% in the year-ago quarter and in line with the analyst consensus of 67.1%.

Nvidia reported adjusted operating expenses of $1.45 billion, above the expected $1.43 billion. Adjusted operating income came in at $3.68 billion, topping the expected $3.54 billion. Free cash flow was reported at $2.74 billion, below the $3.32 billion projection.

For the first quarter, Nvidia expects adjusted operating expenses of about $1.60 billion, more than the analyst consensus of $1.46 billion. It anticipates Q1 revenue of roughly $8.1 billion (up or down 2%), topping the analyst expectations of $7.22 billion. The company expects a Q1 gross margin of 67%, plus or minus 50 basis points.

Should You Buy Nvidia Stock?

In response to the latest earnings report, Nvidia stock fell 7.5% on the following day. The selloff presented investors with a great opportunity to buy Nvidia stock in early March given that shares hit a 5-month low just above the $200 mark.

Nvidia shares rallied nearly 30% off the multi-month lows to return trading above $250. The rally stopped at the 100-DMA with Nvidia stock buyers now hoping for another pullback to reload at a cheaper price.

For long-term investors, there is no doubt – investing in a high-quality, high-growth stock that is attacking a $1 trillion total addressable market (TAM) is a no-brainer.

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