As you’re surely aware, Nvidia (NASDAQ:NVDA) stock has moved relentlessly higher this year so far. This is probably due to the market’s hype over artificial intelligence technology.
It might seem overdone and irrational, but risk-tolerant financial traders might still have valid reasons to stay invested in Nvidia.
Cautious investors can wait for a 20% pullback in Nvidia stock before jumping into the trade.
Just be aware that hesitating can come with an opportunity cost, as Nvidia’s high valuation is liable to climb even higher in 2023’s second half.
Wall Street and Main Street Love NVDA Stock
Whether you should wait for a share-price pullback or jump in immediately, depends on your view of market sentiment. Do you prefer to ride along with the momentum, or are you more of a contrarian investor?
Clearly, Nvidia has market momentum on its side. Check Twitter or StockTwits on any given day, and you’ll find that the prevailing sentiment is overwhelmingly positive for Nvidia.
Wall Street’s experts love Nvidia, as well. Out of 33 top analysts, 3o have issued a “Buy” or equivalent rating.
A typical example is Tigress Financial Partners analyst Ivan Feinseth, who raised his price target on Nvidia stock from $320 to $560. Feinseth called Nvidia “one of the best ways to play the accelerating adoption of AI into all types of technologies and applications,” and issued a “Buy” rating on the shares.
In a similar vein, Truist analyst William Stein disclosed a “buy” rating on NVDA stock. Observing strong demand for AI chips, Stein lifted his price target on Nvidia shares from $470 to $545.
Investment in Drug-Discovery AI Technology
As long as the company continues to invest in leading-edge AI technology, it’s likely that Wall Street and Main Street will favor Nvidia. It seems like Nvidia is constantly discovering new connections to the AI market.
For instance, Nvidia is reportedly in discussions to potentially back an initial public offering (IPO) of chip designer Arm, which is controlled by SoftBank (OTCMKTS:SFTBY).
This is a significant news item, no doubt. Yet, it shouldn’t overshadow Nvidia’s equally important investment in generative AI-assisted drug discovery.
Here’s the scoop. Reportedly, is investing $50 million in biotechnology company Recursion Pharmaceuticals (NASDAQ:RXRX).
By deploying Nvidia’s AI-compatible technology, Recursion seeks to “help solve one of the world’s most difficult challenges, drug discovery,” according to Recursion Pharmaceuticals CEO Chris Gibson.
It’s exciting to consider the possibility of AI contributing to improved health outcomes in the future. Truly, Nvidia’s investment in Recursion Pharmaceuticals is another example of Nvidia’s unrelenting drive to advance new and impactful use cases for AI.
What Should You Do With Nvidia Stock?
Nvidia’s valuation certainly looks bloated, and this can be confirmed by checking several metrics. As a value-focused investor, my instinct is to wait for Nvidia stock to pull back 20%. Only then would I feel comfortable hitting the “buy” button.
The market is likely to favor Nvidia for a while longer. After all, sentiment drives asset prices in the short term. Plus, there’s no denying that Nvidia is a highly ambitious technology juggernaut.
It’s safe to conclude that Nvidia will continue to think expansively in terms of AI applications. That being the case, NVDA stock probably has room to run higher in 2023.
Consequently, it’s fine for risk-tolerant, growth-focused traders to hold a few Nvidia shares. Just be ready to exit your position quickly if there’s a sea change in the overall sentiment surrounding Nvidia.
On the date of publication, David Moadel 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.