Chip Stocks Just Had Their Longest Losing Streak Since 2008. Should You Buy Nvidia Stock Now?

For eight consecutive days, starting from October 7, the PHLX Semiconductor Index, a key benchmark for semiconductor stocks, plummeted around 16%. This trend marked the longest streak of consecutive declines since October 2008. Nvidia (NVDA +1.38%) experienced a decline of approximately 10%, dropping from its record close of $239.24 on October 6 to $214.13.

The index showed signs of rebound on Monday, with a 1.6% increase as of the current reporting date. However, given the recent sell-off, the question arises: should investors consider purchasing Nvidia stock at this time or wait for a better opportunity?

Historically, chip stocks have faced similar streaks of decline. There have been six instances since Nvidia's shares began trading in 1999, including declines in May and September 2002, May and June 2006, late December 2007 through early January 2008, and most notably, the longest eight-day losing streak in October 2008. Nvidia's performance during these periods varied significantly.

For instance, following the October 2008 streak, Nvidia's shares more than doubled in value. However, other cases saw a decline of up to 69% a year later, particularly those occurring before the depths of the 2008 downturn.

Analyzing Nvidia's recent performance offers a different perspective. Since its inception in 1999, the chip index has seen declines of at least eight consecutive sessions six times, with Nvidia's stock being higher a year after four of these instances. The four instances where Nvidia's stock was higher a year after the streak included gains of 118%, 87%, 47%, and 47%.

In contrast, two instances resulted in declines of 31% and 69% a year later. It is worth noting that both losing cases occurred prior to the most severe downturn in chip stocks.

When considering Nvidia's current standing, the company's recent quarterly results show a strong performance. Revenue in the second quarter of fiscal 2027 surged 106% year-over-year, reaching $96.2 billion, an acceleration from the previous quarter's 85% growth. Operating income also saw a substantial increase of 124% to $63.7 billion.

Management's guidance for the fiscal third quarter anticipates revenue of $108 billion, reflecting an expected growth of around 89%, positioning Nvidia well amidst the broader market uncertainty.

Despite the recent sell-off, Nvidia's stock trades at approximately 14 times its expected earnings for the fiscal year ending in January 2028, based on Wall Street's average estimates. This valuation suggests that investors may be anticipating a slowdown in growth. However, Nvidia's robust performance metrics and market position suggest it could be a worthy investment opportunity.

Given the mixed historical outcomes of similar market downturns, a cautious approach, such as a gradual investment over several months, might be prudent rather than a one-time purchase.