Nasdaq Correction: This Magnificent Stock Is a Rare Bargain
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In recent years, investors showed their optimism about the future by flocking to high-growth stocks -- and that pushed the prices of some of these players into the stratosphere. The idea was these companies would benefit from a potentially lower interest-rate environment ahead, and, in many cases, the development of artificial intelligence (AI).
As a result, benchmarks tumbled, and the Nasdaq even entered correction territory last week, falling more than 10% from its most recent high on Dec. 16. No one likes to see stocks tumble. But one positive thing the movement brings is the opportunity to get in on quality companies at a valuation you never would have believed possible. Looking for an example? This magnificent stock is a rare bargain right now.
This particular player has been one of the top performers of the AI boom, posting the biggest gain in the Dow Jones Industrial Average last year and generating double- and triple-digit revenue growth quarter after quarter. The company has built an AI empire and this has translated into a solid leadership position. Which player am I talking about? AI chip giant, Nvidia (NASDAQ: NVDA).
Before we discuss the stock's dirt cheap valuation, let's take a quick look at the story so far. Nvidia makes graphics processing units (GPUs), or the chips that powers crucial AI tasks like the training and inferencing of models. What's key is Nvidia's GPUs are the most powerful around, and as a result, the world's biggest tech companies -- from Microsoft to Meta Platforms -- flock to Nvidia for them.
This created surging demand, with it surpassing supply, for Nvidia's latest release -- the Blackwell architecture. So, even though companies had to wait to get their hands on Blackwell, they were willing to do so, knowing that it could supercharge their AI projects.
All of this, as mentioned, has led to soaring revenue at Nvidia, and the recent reporting period is no exception. The company posted triple-digit revenue growth to a record of $130 billion for the 2025 fiscal year that ended Jan. 26, 2025, and in its very first quarter of commercialization, Blackwell brought in $11 billion. Importantly, Nvidia has consistently been very profitable on sales, with gross margin topping 70%.
This is fantastic, but you might wonder why it makes sense to be optimistic about Nvidia moving forward into the next several years. Nvidia is keenly focused on innovation, promising to update its GPUs on an annual basis, and this should make it very tough for rivals to encroach on its territory. This is an internal factor that Nvidia can control to a certain degree.
The external factor is linked to big tech spending on AI, and here, especially in times of economic uncertainty, investors may worry. But tech giants such as Meta and Alphabet, for example, have recently set out plans for tech spending to make it to their AI goals, and this supports the idea for more growth ahead for Nvidia. Even if an economic slowdown delays certain companies' long-term AI projects, it's unlikely it would completely derail them. Companies already are well into these program, and these are programs they are counting on for growth.
All of this means that there's reason to be optimistic about Nvidia's prospects even if the markets are facing headwinds at the moment.
Now, let's talk valuation. Nvidia often traded for more than 48 time forward earnings estimates in recent months, but declines have brought valuation down to a shockingly low level of 23 times earnings estimates. This is the stock's lowest level by this measure in more than a year. And this makes it one of the three cheapest "Magnificent Seven" stocks right now.
The "Magnificent Seven" are a group of high-profile tech stocks that have driven market gains in recent years, and they've each seen their prices and valuations decline in recent days.
Considering Nvidia's likelihood of staying ahead in the AI market and strong future revenue prospects as the AI boom continues, this magnificent stock is a rare bargain right now, and one to snatch up during the Nasdaq correction.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Nasdaq Correction: This Magnificent Stock Is a Rare Bargain was originally published by The Motley Fool
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