Nvidia has gone from Wall Street’s favorite stock to one of its most heavily sold stocks in just a few weeks. Shares have dropped about 22% over the past month, and Wednesday’s session was ugly. The stock closed at $186.24, down nearly 7% on the day, as a broad sell-off hit the chip sector hard. AMD fell more than 17% and Broadcom dropped more than 10%.
Jim Cramer, the host of CNBC’s Mad Money, spent part of his Wednesday program making the case that now is the time to buy. His argument rests on valuation: “This is the cheapest multiple on Nvidia in about a decade. We’re at 16.5 now.” He said investors are writing off a company he believes remains the dominant force in artificial intelligence infrastructure, 24/7 Wall St. reported.
What sparked the Nvidia selloff
The slide started in late September. At that point, Nvidia’s shares sat at about 17 times forward earnings, a level not seen since January 2015.
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The stock’s 15-year average is roughly 30 times. The discount was real, but sellers kept coming anyway.
The trigger on Wednesday appears to have been a mix of concerns: worries about AI regulation, questions over whether hyperscalers will keep spending at the pace Nvidia needs, and rotation out of high-multiple tech names. The selloff was broad enough to drag down the entire chip sector, not just Nvidia.
Nvidia’s fundamentals tell a different story
The business results themselves have been hard to fault. In its fiscal second quarter, Nvidia posted revenue of $96.2 billion, up sharply from a year earlier. Data center revenue came in at $89 billion, a 117% jump. Earnings of $2.22 a share beat the $2.09 consensus estimate. The company guided for fiscal third-quarter revenue of $108 billion, a figure that left some investors expecting more, according to Nvidia.
The company has also been using its cash aggressively. Nvidia repurchased about $39.8 billion worth of its own stock in the first half of fiscal 2027, and it still had $99 billion left on its buyback authorization at the end of the second quarter. Total buyback capacity, including a new tranche approved in late September, now stands at $235 billion, Cramer noted on X.
Cash on the balance sheet stood at $56.6 billion. Supply commitments have more than doubled, from $119 billion to $279 billion, a sign that the company is locking in future production at scale. Revenue from the roughly 50 largest frontier AI labs alone accounts for about $50 billion of that pipeline, the Motley Fool reported.
Nvidia has gone from Wall Street’s favourite stock to one of its most heavily sold in just a few weeks.Sean Gallup / Getty Images
The gross margin question
Not everything is pointing up. Gross margins are under pressure. They came in at 75% last quarter and are guided to 74% for the current period. Management said the bottom would likely come in the fourth quarter of fiscal 2027, when margins are expected to fall to between 71% and 72%.
The dip is attributed in part to ramping up its next-generation Blackwell architecture, which entails higher initial costs, and to rising memory costs. Management said margins should recover in fiscal 2028 as Blackwell scales, according to Nvidia.
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Days sales outstanding, a measure of how long Nvidia waits to collect payment, jumped to 60 days from 45. That means money is sitting in receivables longer, which some analysts read as a sign that big customers are stretching their payment terms as spending programmes get more complex.
What the analysts are saying
Wall Street has not given up on the stock. Bank of America held its Buy rating and called the selloff an “enhanced” buying opportunity. Morgan Stanley kept its Overweight and said Nvidia is now “the best value in the group,” as reported by TheStreet.
Melius Research, which has a Buy rating on the stock, set a price target of $315 on November 2, implying about 52% upside from levels around that time. The TipRanks consensus across 37 analysts puts the average 12-month target at around $309.
Cramer’s view fits that general direction, though he is making the case more loudly than most. His read is that the market is treating AI infrastructure spending as a risk, even though, in his view, the commitment from the largest cloud and AI companies is as strong as it has ever been. Whether Wednesday’s close marks a floor or a pause will depend on what those customers say next.
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