Buy, Sell or Hold NVIDIA Stock at $134

Nvidia (NASDAQ:NVDA) was rocked by Chinese artificial intelligence lab DeepSeek releasing an AI model that was more efficient, faster, and cheaper than exist models. It was built using Nvidia’s low-powered A100 chips to get around technology exports to China.

The fear was the development would hurt sales of its high-end AI accelerators and cut into profit margins as customers opted for lower priced chips or those from its competitors. NVDA stock dropped 17% in one day.

 

Over the past week and a half, though, Nvidia has made a comeback. Its shares, which reached a low of $113 per share, have marched 19% higher as the market has had time to digest the DeepSeek news.

It appears the threat may not be as great as initially feared. Rumor is that DeepSeek may have actually had access to Nvidia’s high-performance chips and demand for its newest Blackwell accelerators may not fall as feared.

While it still has overheating issues with the advanced accelerators, demand for them is not expected to dry up. With inventory sold out through the end of the year and its foundry Taiwan Semiconductor Manufacturing (NYSE:TSM) planning to double capacity by year-end to handle production, the machine is still humming along.

With NVDA stock seeming to have a ceiling in recent months around $150 a share and the chipmaker due to report earnings on Feb. 26, investors are wondering whether the leading AI stock is a buy, sell, or hold.

Buy now

Nvidia is showing impressive growth. Driven by its dominance in AI and gaming. Its graphics processing units (GPUs) are essential for data centers, AI model training, and gaming platforms, all of which are still growing markets, some markedly so. 

Nvidia’s revenue has increased significantly, with strong earnings reported in recent quarters. Wall Street analysts are mostly bullish. Of the 43 analysts covering the stock, the lion’s share rate NVDA stock a buy. They have assigned a consensus one-year price target of $166 per shares, implying 24% upside in the stock. It remains popular amongst investors, too, and it is still one of the most-talked about stocks on investing discussion boards like Reddit. Yet that alone is not a reason to buy.

The demand for AI technology is expected to continue, and Nvidia is well-positioned to benefit. According to the National Telecommunications and Information Administration, there are approximately 5,000 data centers operating in the U.S. and their number is projected to increase by 9% annually through 2030. 

A massive joint venture led by Oracle (NYSE:ORCL) called Stargate is building a 1-million square foot facility in Texas and Nvidia has been identified as one of the “key initial technology partners” for it.

Moreover, Advanced Micro Devices (NASDAQ:AMD) is not making as much headway in the data center market as investors hoped. It is still early innings, but Nvidia remains way out in front and may even be pulling away.

Sell now

Nvidia’s stock price has risen sharply, leading some to worry that it is overvalued, even after its recent haircut. The stock still trades at 52 times trailing earnings, almost 30 times sales, and 58 times the free cash flow it produces. 

That implies it would take 58 years to pay for the earnings it is generating today. Of course, earnings are still expected to grow and Wall Street estimates profits will grow at a 60% compound annual rate for the next five years. 

And though Nvidia is leading the way in AI chips, AMD and Intel (NASDAQ:INTC) have developed their own AI-focused chips that could challenge Nvidia’s dominance. They are in many instances as powerful as Nvidia chips and are significantly cheaper, a key consideration with the developments out of DeepSeek. 

Moreover, tariff and trade tensions could also disrupt supply chains and upend end markets for Nvidia, adding to its risk at these prices. If the chipmaker’s earnings report isn’t stellar, NVDA stock could tumble. Locking in profits now might be the smart move.

Hold tight

The dust has yet to settle around what DeepSeek means to Nvidia. While the initial selloff may have been overwrought, the subsequent bounce back may be too much exuberance. There remains a lot that is still unknown about how this will affect AI model development, so sitting tight and waiting for clarity may make sense.

The verdict

I’m expecting Nvidia’s earnings report later this month to be big. While growth rates will continue to shrink, it’s hard to maintain triple-digit rates. Even so, the AI market continues to expand. Investments in the space will continue at a high level.

Amazon (NASDAQ:AMZN) CEO Andy Jassy told analysts recently “we obviously have a deep partnership with Nvidia and will for as long as we can see into the future.” Other hyperscalers undoubtedly feel the same.

Despite NVDA stock’s lofty valuation, in relation to its projected earnings growth rate, it is a bargain and I’d rate its stock a buy.

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