Despite recent news, analysts still say Nvidia stock is a buy in the artificial intelligence space. Here’s why.

Nvidia (NVDA -2.25%) has been one of the best-performing stocks in recent years, a run that has catapulted it into the world’s most valuable company. But over the past two months it has fallen to second place and then – briefly – to third place, behind two other major tech companies. Apple And Microsoft.

But don’t give up on Nvidia just yet, which returned to second place with a market cap of $3.41 trillion. Many Wall Street analysts think the best is yet to come for this crucial supplier of chips to power artificial intelligence (AI). Here’s what they think of the company’s most recent quarterly results.

Why analysts loved Nvidia’s results

The stock has retreated in recent weeks, but smart investors should consider this just noise. Looking back at the company’s most recent quarterly results, announced on December 6, almost everything is going well for Nvidia.

A Wedbush analyst, Dan Ives, called the earnings report “impeccable” and added that it “should be framed and hung in the Louvre.” He then called CEO Jensen Huang the “Godfather of AI” and called the company’s latest Blackwell AI chip the LeBron James of semiconductors.

Ives added: “We believe the path to a market cap of $4 trillion and beyond has now been set by Nvidia, and this is positive for the broader tech rally through the end of the year and 2025.”

After the earnings report, analysts at three other companies said — JP MorganDA Davidson and Bernstein raised their price targets for the stock.

Davidson’s Gil Luria said: “Nvidia is well within the realm of possibility to extend growth into next year, given hyperscaler commentary around additional investments in AI computing and the company’s ability to deliver even amid production setbacks.”

And William Stein from Truist said Nvidia “stays the AI company for its culture of innovation, ecosystem of incumbents and massive investments in software, pre-trained models and services.”

Although the chipmaker’s stock price has fallen lately, Wall Street analysts remain very optimistic about its long-term prospects. Should you buy the pullback? We will discuss that next.

How to strategically invest in Nvidia now

There is a big difference between a company that is doing well and the stock price that is doing well. Nvidia will grow by leaps and bounds in the coming years and decades.

But the share price already reflects much of this potential. Even if the entire company is valued at more than $3 trillion, its shares are priced at an astonishing 30 times sales. By comparison, Microsoft trades at just thirteen times revenue, while Apple trades at a relatively paltry ten times revenue.

Of course, Nvidia’s growth rates (both current and projected) are well ahead of those of these companies. And while demand for AI infrastructure is growing rapidly, it is likely still in its infancy. However, the stock has a high multiple, and that reality usually comes with a lot of volatility. Small shifts in the growth prospects of a sector or company can have a major impact on the valuation ratio, and therefore the share price.

If you believe in AI in the long term, this could be your chance to build a position at Nvidia. Don’t be shocked if you have short-term opportunities to grow your investment at a lower share price.

And consider adding other chipmakers to diversify your position. Nvidia currently has a dominant lead in AI semiconductors, but as previous chip wars have proven, the top dog doesn’t always stay there forever.

Nvidia stock is a better deal today than it was a few weeks ago, but make sure you diversify your position accordingly, with fresh money available to buy more if short-term volatility returns.