History Says Now Could Be an Ideal Time to Buy Nvidia Stock Hand Over Fist

Does the past provide clues about what the future holds? Sometimes it does.

This could be great news for anyone considering investing in Nvidia (NASDAQ: NVDA). History says now could be an ideal time to buy Nvidia stock hand over fist.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Down but not out

Artificial intelligence (AI), especially the rise of generative AI, has provided a massive tailwind for Nvidia in recent years. The stock has delivered a return of nearly 21x since early 2020 and is up more than 80% during the last 12 months.

However, Nvidia's share price has fallen over the last few weeks. Chinese company DeepSeek's launch of a low-cost AI model caused investors to worry that the surging demand for Nvidia's GPUs could wane. DeepSeek claimed to develop its R1 reasoning model, which stacks up well against the best AI models available, using older Nvidia chips.

But anytime Nvidia stock has dropped 10% or more in the past, it presented a fantastic buying opportunity. Such declines have happened more often than you might think. Nvidia's share price has sunk by a double-digit percentage from its previous peak at least once every year since 2015 with one exception. The stock bounced back and eventually reached a new high each time.

Earnings anticipation

This rebound effect isn't the only way history supports the premise that now is an ideal time to invest in Nvidia. Another pattern to consider is how the stock has performed after the company's quarterly earnings updates.

It's most instructive to examine this earnings anticipation factor since OpenAI's launch of ChatGPT kicked off the generative AI boom in late 2022. The chart below shows Nvidia's stock performance in the weeks following the announcement of its quarterly results in February 2023.

NVDA data by YCharts

Here's how Nvidia stock performed after the next quarterly earnings update:

NVDA data by YCharts

Did this trend continue? For the most part, yes. Sure, there were some exceptions. However, Nvidia has a great track record of beating Wall Street's earnings expectations.

This matters because Nvidia is scheduled to announce its fiscal year 2025 fourth-quarter results just a few weeks from now on Feb. 26, 2025. Importantly, this will be the company's first quarter to report revenue from its powerful new Blackwell chips. Analysts project that Nvidia's Q4 earnings will jump 63% year over year. But with Nvidia CEO Jensen Huang indicating that the demand for Blackwell is "insane," Wall Street's estimates could be too pessimistic.

History doesn't always repeat itself

To be sure, history doesn't always repeat itself. Just because Nvidia's share price has always risen after double-digit percentage declines in the past doesn't mean it will do so this time. The company's track record of beating earnings estimates might not continue.

Importantly, Nvidia hasn't faced the threat in its recent past that DeepSeek presents now. Nvidia's sky-high valuation (its shares trade at 28.5 times trailing 12-month sales) reflects expectations of tremendous growth. Anything that derails that growth would almost certainly cause the stock to tumble. And many investors are concerned that DeepSeek's AI technology could negatively impact Nvidia's growth.

Aswath Damodaran, the NYU finance professor known as the "Dean of Valuation," is one of those investors. He recently wrote, "DeepSeek's abrupt entry into the AI conversation has the potential to change the AI narrative, and as it does, it may also change the storylines for the many companies that have spent the last two years benefiting from the AI hype." He put Nvidia at the top of the list of those companies that have been helped by "the AI hype."

However, several of Nvidia's largest customers provided quarterly updates over the last few weeks. All of them plan to significantly increase their capital investments and are specifically doing so to boost their capacity to train and deploy AI models. That's encouraging news for anyone who agrees with the adage that "history doesn't repeat itself but it often rhymes."

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $795,728!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

Learn more »

*Stock Advisor returns as of February 7, 2025

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.