Nvidia shares had their worst day in two years and are now in "bear" territory. Is it time to buy?

Shares of chipmaker Nvidia plummeted 9.3% on November 5, marking the stock’s sharpest one-day decline since January 27, 2025. This time, the sell-off was driven by investor concerns that a Democratic victory in the U.S. midterm elections would lead to restrictions on data center construction and a slowdown in hyperscalers’ spending on AI infrastructure.

Shares of the AI chipmaker have fallen 24% from their October high, indicating that the stock has entered a “bear market,” MarketWatch noted. On Wall Street, this term refers to a decline of more than 20% from the most recent high. On November 5, Nvidia lost more than $440 billion in market capitalization, marking the second-largest one-day decline in the company’s value, according to Dow Jones Market Data. Since reaching its peak a month ago, Nvidia’s market capitalization has fallen by approximately $1.4 trillion.

Nvidia CEO Jensen Huang fell out of the top 10 richest people in the world following a stock sell-off on Thursday, Bloomberg reported. His net worth fell by $15.1 billion to $151 billion.

Shares of Nvidia, the world’s second-largest company by market capitalization, were trading at just 13 times forward earnings (P/E ratio) at the start of trading on Thursday—30% below the corresponding multiple for the broad-market S&P 500 index, according to Barron’s.

"On Thursday, investors were 'trying to make sense of an economic reality in which the development of AI infrastructure is driving the economy,'" Michael Monaghan, portfolio manager at Founder ETFs, explained to MarketWatch. He attributed the sharp daily fluctuations in stock prices to the actions of hedge funds, which use high leverage and have stricter risk limits. When company stocks begin to fall in price, such traders are forced to quickly close out their positions, which can amplify intraday market movements. However, this also means that the market is capable of reversing course just as quickly, he added.

According to Monaghan, Nvidia's revenue is expected to grow by 70% next year. Despite concerns about a possible halt in data center construction, he believes that construction will most likely continue, meaning that demand for chips will remain high. Strong financial results from key companies in the semiconductor sector served as a reminder that concerns about delays in data center construction have not yet had a direct impact on the business of Nvidia and other equipment manufacturers, Barron’s reported on November 4. Customers were rushing to purchase AI equipment despite ongoing uncertainty about whether they would have space to install it, the publication noted.

Ahead of Nvidia’s quarterly earnings report, scheduled for November 17, Monaghan views the decline in its stock price as a buying opportunity. According to him, the stock will be supported by the launch of Nvidia’s new Rubin AI chips, which Elon Musk’s SpaceX plans to purchase for up to $40 billion.

Monaghan believes that the fundamental factors related to massive AI spending and high demand remain in place. “When a stock price moves in the opposite direction of its fundamentals, it usually creates very attractive investment opportunities,” he said.

Nvidia’s stock has fallen as investors worry about how heavily the company’s profits depend on massive spending on AI infrastructure, which may slow over time, David Wagner, a portfolio manager at Aptus Capital Advisors, explained to MarketWatch. “Nvidia likely has a wider moat than any other player in the AI market, thanks to its chips, software ecosystem, and the fact that developers are building their work around its technologies,” Wagner emphasized. If investors believe that the development of AI infrastructure will continue for years to come, then Thursday’s drop in Nvidia’s stock “looks more like a revaluation than a collapse of the investment thesis.” Wagner added that Nvidia’s stock looks as if it’s on “sale.”

Rocky White, a technical analyst at Schaeffer’s Investment Research, highlighted a historical signal suggesting the possibility of a rebound in Nvidia shares in a report published on November 5. According to him, over the past 20 years, the company’s stock has found itself in a similar technical situation 18 times, and in 82% of those cases, its price was significantly higher three months later. The average gain was 11.4%, according to White’s calculations.

"We believe the sell-off was driven by concerns about potential delays in data center construction. However, in our view, the worst-case scenario is precisely these delays,” said Joanne Finney, portfolio manager at Advisors Capital Management, in an interview with Barron’s. “The market valuations of some companies have become particularly attractive, and we count Broadcom and Nvidia among them.”

This article was AI-translated and verified by a human editor