Nvidia's AI Growth Engine Fires Up Despite Stock Lag

Nvidia's CEO Jensen Huang told investors in June to 'buy at a discount' during the company's sell-off. Nearly three months later, Nvidia is up 4%, and a broader AI basket gained 8%. The question remains: did his call pay off?

Since Huang made his 'buy' call on June 8, Nvidia's stock has been up 4%. This is comparable to the S&P 500 index's return over the same period. However, if investors had put equal amounts into Nvidia, Microsoft, Amazon, and Alphabet, creating a diversified artificial intelligence basket, they would have benefited from an 8% gain.

Microsoft was the primary contributor to this gain, rising 24% over the period. Alphabet actually fell 5%, while Amazon was up 8%. This highlights that three months is too short a period to determine whether an investment is good or bad for long-term investors.

Huang's logic for buying Nvidia at a discount is rooted in his belief that AI is a long-term growth engine for both the company and the world. The company's financial results in the fiscal second quarter of 2027 show strong demand for AI chips, with revenues rising 18% sequentially from the first quarter and an impressive 106% year over year.

The stock's price-to-earnings ratio is 17.5x, which is below its five-year average of 23x and significantly lower than the S&P 500 index's 25x P/E ratio. This suggests that Nvidia could still be a good investment opportunity for long-term tech investors.