Investor sentiment on artificial intelligence stocks has been more volatile than an altcoin, and the recent dip has turned Nvidia stock into a buying opportunity. Many investors panicked upon DeepSeek’s claim of having much lower AI costs than U.S. companies. Nvidia shed 17% of its value in a single day but rebounded after three weeks.

The DeepSeek reaction presented a great buying opportunity because the stock market had a misunderstanding. DeepSeek’s parent company is a hedge fund that could have profited immensely by initiating short positions on AI stocks before the DeepSeek announcement went mainstream.

Doubts about the AI trade deflating came to a quick conclusion as big tech companies announced they would continue to ramp up their AI investments. It seemed like the buying opportunity had come and gone, but a sharp pullback has captured all tech stocks, resulting in a more attractive valuation.

The Tariffs Have Been Hurting Growth Stocks

Investors don’t like uncertainty or tariffs, and those two factors have been hitting the stock market hard. The S&P 500 and Nasdaq Composite are both down year-to-date and when those indices are down, Nvidia is down even more. 

Nvidia has shed roughly 20% of its value since February 20. The fear with tariffs is that the extra tax on imports will increase prices and reduce demand. President Trump is spearheading the charge. 

While arguments can be made about tariffs being beneficial in the long run, they present headaches in the short run. Some countries are making an intentional effort to avoid doing business in the United States. Canadian stores are pulling some American products off their shelves while American companies have been losing market share in China. The latter issue has been going on before Trump started his second term, but tariffs likely won’t make things better.

Nvidia Should Continue to Flourish

While higher prices will impact consumers, Nvidia’s top customers generate billions of dollars in profit every quarter. Furthermore, these companies remain committed to AI investments due to the industry’s long-term potential. While data centers have been Nvidia’s major segment, the company is also a critical chipmaker for self-driving cars and robots, two segments that can see booming demand in the years ahead.

Although the AI industry suddenly looks gloomy, Nvidia’s financial results were anything but gloomy. The company beat expectations and guidance while delivering superb growth. Revenue increased by 78% year-over-year, while net income jumped by 80% year-over-year. Even the guidance was good.

Perhaps investors have been spoiled by triple-digit year-over-year revenue growth rates and decided to send the stock lower on this impressive earnings report. That has resulted in a 38 P/E ratio and a stunning 25 forward P/E ratio. Nvidia’s valuation has not been this low in more than a decade, and Nvidia has more catalysts now than it had back then.

The Biggest Concern

The major concern with Nvidia is how the relationship between the United States and China will change. The recent discovery of Blackwell chips in China may prompt President Trump to tighten export controls. Nvidia’s revenue from China has been shrinking on paper, but soaring revenue from Singapore suggests China is using it as a backdoor.

Nvidia has other issues, as does any company. Investors can look at the pros and cons of any stock, but you’ll find a long list of pros compared to a small list of cons for Nvidia. One of the issues highlights how the impact of tariffs on Nvidia’s business may be muted.

Nvidia has a supply problem. The company’s chips are in such high demand that it can’t produce them quickly enough. President Trump’s ability to leverage tariffs as bargaining chips have prompted Taiwan Semiconductors to invest in a facility in Arizona this year. This development can mitigate Nvidia’s supply issues in the future.

The Long-Term Picture Improves Amid Short-Term Noise

Nvidia has been on a tear over the past five years, but the stock has been flat for several months. The stock chart suggests Nvidia’s business has been flat since the end of May, but the company has delivered exceptional financial results during that timeframe.

It’s hard to see the AI trade dying when big tech, governments, and innovations revolve around the technology. Driverless cars and robots will need Nvidia’s chips. Many software giants also need artificial intelligence chips to remain competitive, especially in the high-growth cloud computing industry.

Nvidia has also established itself as the firm leader in the AI chip industry. Competitors aren’t achieving financial growth rates anywhere close to Nvidia’s. 

As we saw after the DeepSeek market reaction, Nvidia can recover quickly. A stock as volatile as Nvidia isn’t going to climb back up gradually. Nvidia gained 11% from February 3 to February 7, shortly after the DeepSeek plunge took place. Nvidia stock followed it up with a 7% gain the following week. 

It may take a little longer before Nvidia rebounds. However, investors who can hold onto the stock for a few years should be rewarded at current levels. 

As of this writing, the author had a long position in NVDA.