Jasmine Birtles
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NVIDIA is Down! Here’s Why I’m Not Buying the Dip.
Ruby Layram
30th Jan 2025
NVIDIA’s stock has taken a notable hit recently, leaving many investors wondering if it’s the perfect time to “buy the dip.” While the allure of snagging shares at a discount is tempting, I’m choosing to hold off. Here’s why.
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The DeepSeek Dilemma
A significant factor in NVIDIA’s recent decline is the emergence of DeepSeek, a Chinese AI startup that’s making waves with its cost-effective AI models.
DeepSeek claims its technology rivals that of industry leaders like OpenAI’s ChatGPT but at a fraction of the cost.
This development has raised concerns about potential competition for NVIDIA, especially if more companies adopt DeepSeek’s efficient models.
Retail Investors Have Been Quick to Buy
In response to the dip, retail investors (investors like you and me) have been quick to buy up NVIDIA shares, with purchases totalling over $920 million in just a couple of days.
This surge indicates a strong belief amongst investors in NVIDIA’s long-term prospects.
While DeepSeek’s advancements are noteworthy, some analysts believe they might not pose an immediate threat to NVIDIA.
In fact, increased efficiency in AI could lead to greater demand overall, potentially benefiting NVIDIA in the long run.
Why I’m Holding Back
Despite everyone and their dog buying NVIDIA during the dip, I’ve chosen to proceed with caution. Here’s why!
Market volatility
The tech sector, especially AI, is experiencing rapid changes. New players like DeepSeek can disrupt the landscape, and it’s unclear how this will impact established companies like NVIDIA.
There’s a lot going on at the moment and I have chosen to take a bit of a backseat and watch things unravel before making any long-term decisions.
NVIDIA stock is still at a high price!
Even after the recent dip, NVIDIA’s stock remains highly valued. Jumping in now might not provide the growth that some investors are hoping for.
Despite the recent dip, NVIDIA’s stock price is still significantly higher than it was this time last year.
I prefer to observe how NVIDIA navigates these emerging challenges. Will they innovate further to maintain their edge? Only time will tell!
Is “Buying the Dip” a Good Idea?
Buying the dip might sound like a smart move—after all, who doesn’t love a discount? But just because a stock has dropped in price doesn’t mean it’s a good deal.
Sometimes, a dip is just a temporary setback, but other times, it signals deeper problems. A company could be facing slowing growth, increased competition, or broader market shifts that make its future uncertain.
Investors who rush in too quickly might end up catching a “falling knife,” where the stock keeps dropping even after they buy.
Instead of blindly buying dips, it’s wiser to assess why the stock fell in the first place and whether the company’s long-term outlook still looks strong.
In the case of NVIDIA, there is no denying that the company is still strong! If you’re looking to gain exposure to the tech giant before it bounces back, buying the dip could be smart. At the end of the day, what you do comes down to your risk tolerance and long-term strategy.
Final thoughts
While NVIDIA remains a powerhouse in the AI and semiconductor industries, the current uncertainties make me hesitant to buy the dip.
For now, I’ll keep a close eye on developments and wait for a clearer picture before making a move.
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Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
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