With the Nasdaq 100 recently soaring above the 20,000 mark, it may come as a bit of a surprise to learn that Nvidia (NASDAQ:NVDA) stock is flirting with correction territory. After falling more than 2% on Friday after sitting out most of the past month of the hot tech sector rally, NVDA shares are now down around 10% from their all-time highs.

Indeed, the relative underperformance is quite notable, especially since numerous other Magnificent Seven stocks are charging higher together, something I pointed out in a prior piece. Just because Nvidia is being left behind ahead of the Santa Claus rally, though, does not mean it’s time to ring the register as the semiconductor names stall while software begins warming up for the holidays.

As a whole, semiconductor firms seem to be at a crossroads. It remains to be seen how chip stocks react as we head into a new year, with AI tailwinds still very much on the table. Dip-buyers late to the Nvidia or AI chip party may wish to treat the correction in chip plays as a potential opportunity to top up their positions.

Key Points About This Article

• Nvidia stock has lagged the Magnificent Seven, but will it continue to do so through 2024?
• The latest Nvidia stock correction may be nothing more than a blip in the grander scheme of things.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Chip stocks “oversold,” says pro. Nvidia stock looks buyable on the dip.

In a recent note, Renaissance Macro Research’s head of technical research, Jeff deGraaf, referred to chip stocks as “oversold” and praised Nvidia as the “hero of our story. ” He suggested that any further weakness could prove a great buying opportunity. I couldn’t agree more with deGraaf about the AI leader and the chip scene as a whole.

There’s really nothing all too special or concerning about Nvidia stock’s latest plunge into correction territory, perhaps other than the negative momentum itself and the feeling of “missing out” on opportunities within the now-hotter AI software plays, many of which have blasted off double-digit percentage points following their upbeat quarterly reveals.

Indeed, NVDA stock occasionally falls into corrections when the pace of exciting news begins to slow between quarterly earnings reports, corporate events, and product announcements.

While there’s always the fear that the current correction we’re progressing through will be a precursor to “the big drop” that sees Nvidia shares give back a massive chunk of the gains enjoyed in prior years, I do think that the fundamentals, impressive industry backdrop, and growth narrative are supportive to a continuation of gains going into 2025.

Still plenty of promising growth drivers that could help Nvidia surge past estimates

Looking ahead, I’d say it’s realistic that the company grow at close to 40% over the next several years if AI demand puts its foot on the pedal a bit harder. With AI software companies going full speed ahead, I do think it’s too soon to be rotating out of the AI chip companies, like Nvidia, in favor of the software plays.

If anything, strength in AI software is conducive to even more demand for leading AI hardware. In essence, the release of more valuable and monetizable AI applications could set the stage for greater demand for next-generation chips. Indeed, a “Blackwell boom” could be shortly upon us. And, after that, a “Rubin rally,” as Nvidia continues to show why its AI ecosystem stands head and shoulders above that of its competitors.

Either way, I find Nvidia’s growth rate to still be subject to upside and downside surprises in the new year. Perhaps increased demand for AI chips from firms beyond the Magnificent Seven could be a boon if AI has a chance to further demonstrate its ability to achieve a decent return on investment.

The bottom line

Time will tell if Nvidia can follow up on an incredible 2024 with another year of gains. Just because it’s trailing the Magnificent Seven in recent weeks does not mean it’s destined to do so for the year ahead. Though I don’t think Nvidia stock will be the top performer in the Magnificent Seven next year, I do see the name posting respectable results for investors who opt to hold.

In any case, I wouldn’t place a bet against the firm on recent weakness. Over time, NVDA stock has found a way to move higher, even through some seemingly scary headlines (think the recent China anti-monopoly probe) that eventually paled in comparison to new innovations served up by Nvidia’s great CEO Jensen Huang.

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