Why Nvidia Stock Took a Dive Today

Nvidia's stock experienced a decline on Friday as part of a broader sell-off in the tech sector, with shares dropping up to 5.3%. As of later that afternoon, the stock was still down 5.2%. The primary reason cited for the drop was the increasing costs associated with artificial intelligence (AI) and the uncertainty surrounding who would bear these expenses.

According to reports from Bloomberg, Nvidia and Anthropic are reportedly negotiating a financing arrangement, with Nvidia potentially providing billions of dollars in credit guarantees for an Nscale data center. This news underscores Nvidia's pattern of offering credit guarantees and commitments, totaling $165 billion in data center-related commitments and $63 billion in equity stakes in publicly traded companies, including its customers and start-ups.

Investors have expressed concern that if AI adoption slows down or a competitor develops a superior product, it could trigger a domino effect, causing the AI trade to unravel. However, a review of Nvidia's recent financials suggests these fears may be overstated. For the fiscal second quarter of 2027, Nvidia reported revenue of $96 billion, a 106% increase year over year, and expects to reach $108 billion in revenue for Q3 when the results are disclosed in mid-November.

The company also holds over $99 billion in cash and marketable securities, providing ample liquidity to fulfill its financial obligations. With Nvidia's stock trading at less than 26 times earnings, which is its lowest since 2019, and given its strong industry position and robust financial standing, the author argues that Nvidia stock is an attractive buy.