The AI Darling Under Pressure

Nvidia (NVDA) had one of the most explosive runs in stock market history, driven by its leadership in GPUs and AI infrastructure. But in 2025, sentiment has shifted. Investor concerns over declining margins, stretched valuations, and broader tech weakness have sent the stock tumbling. What’s striking now? Its price-to-earnings (P/E) ratio is approaching historical lows, levels not seen since the pre-AI boom.

In simpler terms, Nvidia is now cheaper relative to its earnings than it has been in years.

But should that alone trigger a buy?

Why Some Investors Are Buying at $90

For long-term believers, this dip could be a blessing in disguise. DCA is a proven strategy that reduces the emotional burden of timing the bottom. Here’s why some investors are loading up:

AI Trend Still Intact – While short-term demand may soften, the structural trend for AI, cloud computing, autonomous systems, and machine learning is intact. Nvidia’s chips are still the backbone of that ecosystem.

New Growth Frontiers – Nvidia is pushing into new markets like automotive (through autonomous driving tech), enterprise AI servers, and even software licensing. These may not deliver immediate returns, but they represent upside optionality.

Balance Sheet Strength – Despite the dip, Nvidia remains profitable with strong free cash flow. Its ability to reinvest in R&D and weather downcycles shouldn’t be underestimated.

But Here’s the Bearish Case

While value hunters are salivating at lower P/E ratios, others argue this is a classic value trap. Here’s why some are opting to stay in cash:

P/E Compression Could Continue – A low P/E doesn’t always mean undervalued. If earnings are revised downward again, today’s “cheap” may still be expensive in hindsight.

Macroeconomic Risks – With the Fed still cautious on rate cuts, high interest rates are pressuring growth stocks across the board. Nvidia, despite strong fundamentals, is not immune to this.

Competition Is Rising – AMD, Intel, and even Apple are aggressively building their own chips. While Nvidia leads, the gap may narrow over time.

AI Hype Cooling Off – As earnings get priced for perfection, any slowdown in AI demand—even temporary—could spark further downside.

Historical P/E Perspective

Looking at Nvidia's historical averages, the current P/E is the lowest since the early 2020s. However, back then, the company wasn’t priced for AI dominance—it was valued as a strong GPU supplier. So, is it fair to compare?

If Nvidia’s growth reaccelerates in the second half of 2025 or early 2026, today’s prices could be a steal. But if AI adoption enters a slower phase, valuations might still need to adjust.

What Would a Smart Investor Do?

There’s no universal answer. But here are a few strategies depending on your view:

Bullish on Long-Term AI? Consider DCA. Buy gradually at key support levels and hold with a multi-year horizon.

Cautiously Optimistic? Wait for confirmation. Look for signs of stabilization in revenue or guidance before committing.

Risk-Averse or Short-Term Bearish? Stay in cash. There’s no shame in waiting for more clarity before stepping in.

My Take

Personally, I see Nvidia as a company with a brilliant long-term future. But I also respect market cycles. The current low P/E is attractive only if earnings stabilize. If guidance continues to fall, the “cheap” P/E becomes a moving target.

I believe in nibbling, not diving in. For me, this is a time to DCA cautiously, not all-in. I’m watching for signs that enterprise AI spending remains robust, and whether Nvidia can maintain its pricing power.

But I also keep dry powder on the sidelines—because sometimes, cash is a position too.

Final Thoughts

When great companies fall, emotions run high. The question isn’t whether Nvidia will survive—it’s whether it will thrive in the near term. With the P/E ratio at historic lows, the setup is tempting. But with uncertainty swirling, the disciplined investor doesn’t chase blindly. They act with purpose.

Are you ready to take that step—or wait and see?