In January, the DeepSeek-induced sell-off sent shockwaves through the artificial intelligence (AI) and semiconductor sectors, with Nvidia’s stock taking a significant hit. However, this presented a rare buying opportunity for investors.
Despite the initial panic, Nvidia’s position as a linchpin in future large language model (LLM) developments, driven by its market-leading AI accelerator chips, remained intact. The growing Sovereign AI movement and intensified hyperscalers’ capex trends has further supported this.
Since then, Nvidia has partially recovered its losses, but the broader market correction since mid-February 2025 has weighed on its valuation. The stock shed over $1trn in value from its peak, reflecting the broader pain in the tech sector. This pullback, exacerbated by the intensified tariff war and potential tighter US export controls, has created some concerns about the Nvidia’s investment thesis. For example, Asia, which accounts for 47% of its FY2024 revenues, remains a critical market, and any disruptions could further impact growth.
No clear signs of a slowdown
Despite these challenges, Nvidia’s reports and guidance remains strong. The firm reported a double beat in Q4 of 2025, with revenues of $39.3bn (up 77.9%) and adjusted EPS of $0.89 (up 71.1%). The data centre segment, which now comprises 90.4% of sales, continues to drive growth.
Looking ahead, Nvidia continues to innovate and is seemingly some way ahead of its peers in the AI/data centre market. It’s the key partner of hyperscalers and the ramp up of its Blackwell architecture is driven by substantial demand. We also appear to be in a period of rapid innovation and adoption where replacement cycles are very short. This is also driving growth.
Are there risks to the thesis?
There are clearly risks and concerns, hence the two recent sell-offs. While Nvidia recovered from the DeepSeek-engendered chaos, investors are seemingly worried that the more Chinese tech innovations could upset the balance and Nvidia’s dominance. It’s also true to suggest that, for now, Nvidia’s reliant on hyperscalers. The democratisation of AI will change this but, for now, it’s hyperscalers buying all the chips.
What’s more, at the time of writing (14 March), Hon Hai — a Nvidia supplier — has just missed profit expectations. This may suggest some weakness at Nvidia, although there’s been plenty of positive data recently.
Valuation reflects concerns
From a valuation perspective, Nvidia appears attractive. According to renowned fund manager Peter Lynch’s price-to-earnings-to-growth (PEG) ratio, the stock is cheap, with a forward PEG Non-GAAP of 0.78, significantly below the sector median of 1.62. What’s more, the forward price-to-earnings (P/E) Non-GAAP of 25.7 times also suggests the stock’s trading at a discount to its historical averages.
Personally, I believe market forces have provided investors with a unique opportunity to invest. Of course, no investment comes without risks. However, everything considered, I’m thinking about topping up. Admittedly, the daily volatility isn’t making it easy to find an entry point.
