Nvidia (NASDAQ:NVDA) has emerged as the standout among the Magnificent 7 stocks, spearheading the AI revolution. However, following its recent stock split, Nvidia stock has taken a hammering, shedding more than 10% of its value. Nonetheless, given its massive growth trajectory and the welcome pullback, Nvidia is an excellent buy-the-dip opportunity.

Given its critical role in advancing the AI industry, Nvidia’s market cap has surged north of 200% in the past year. Consequently, it joined the elusive $3 trillion club last month, becoming only the third company to achieve this milestone.

However, Nvidia stock has dipped over 20% from June highs following its ten-for-one stock split. Moreover, investors have shifted to a ‘show-me’ mode concerning AI, prioritizing substance over hype. Nevertheless, Nvidia stands out, as it’s not just riding the wave but leading it with record top-and-bottom-line growth driven by the disruptive technology. Additionally, the Generative AI gold rush has evolved from the initial hype to sustained investment across different sectors. Therefore, there’s plenty to like about the AI trailblazer as it continues proving naysayers wrong.

AI and Data Center Domination: Massive Growth Trajectory Ahead

As I stated earlier, the generative AI space is maturing as it evolves from the early buzz to robust investment across various sectors. Moreover, we will likely see elevated hyper-scaler spending as the AI race heats up.

Nvidia is poised to reap significant benefits from this trend, having recently unveiled insights into a staggering $1 trillion opportunity led by its AI exploits. The firm’s forecast splits this number across core segments such as data centers, autonomous machines, enterprise AI, gaming and others.

Also, Nvidia’s data center operations are at the forefront of this race, contributing upwards of 85% to its first-quarter revenue. Revenues from the segment jumped 427% year-over-year (YOY) and 23% sequentially. Such massive growth numbers position the company as a juggernaut in the AI space with substantial barriers to entry for its competition.

Moreover, Nvidia is ramping up production of its Blackwell platform. Expected to be released sometime in the fall, the platform has effectively transitioned into full production, promising to support generative AI at the trillion-parameter scale. This breakthrough is monumental for AI, leading to detailed and complex information processing.

Additionally, Blackwell isn’t a stand-alone platform, as it works in tandem with Nvidia’s massive ecosystem. Some of these elements include the company’s advanced GPUs, the Grace CPU and a variety of interconnects and switches. Hence, the tech behemoth has positioned itself for sustained long-term growth in AI, enhancing its software ecosystem while expanding its partner network.

Earnings Cyclicality and Valuation Dynamics

Nvidia’s triple-digit growth in recent quarters has been massive. However, it’s unrealistic to expect such momentum to continue indefinitely. Net income soared from $4.37 billion last year to a whopping $29.76 billion in 2024, a massive 581% increase YOY. Such growth numbers are reminiscent of chipmaker Intel’s (NASDAQ:INTC) rapid rise during the 90’s. However, when the dot-com bubble burst, Intel’s net income dropped more than 80% in 2001.

Therefore, Nvidia’s earnings have an element of cyclicality, especially with its reliance on major hyper-scalers and flexible purchase orders. Yet, earnings growth has held up remarkably well. In the past 12 quarters, quarters with 2% growth or more (positive surprises) are at a healthy 83.3%. Also, it has delivered four consecutive positive surprises in the last four quarters. Additionally, 38 Wall-Street analysts have raised their forecasts for its upcoming quarterly earnings in August.

There is an argument to be made about Nvidia’s lofty valuation following the massive surge in value last year. It trades at 41.2 times forward non-GAAP earnings, which, while trailing its 5-year average, remains significantly high.

Nevertheless, Nvidia stock is down 20% from its 52-week high of $140.76 and has plunged 11% this month alone. Suppose we look at a more nuanced metric like forward price-earnings-growth. We see that Nvidia trades at just 0.8 times earnings growth, roughly 55% behind its 5-year average. If the stock traded in line with its historical norm, it would change hands at $253. On top of that, Wall-Street consensus estimates suggest a 20.3% upside from current prices.

Bottomline on Nvidia Stock

Nvidia stock ran red-hot last year but has cooled off of late. Despite the near-term concerns, the firm continues to shine as an AI leader, unlocking unprecedented opportunities. It persists in advancing its AI technology while dominating data center markets, with Blackwell set to take things up a notch or two.

Moreover, with its robust growth trajectory and appealing valuation across certain metrics, now is an ideal time to load up on Nvidia.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.