Nvidia is at its cheapest in years while traders are already betting on a bounce
Thesis
Nvidia's stock has fallen so far that its price relative to its earnings is back to pre-AI-boom levels — this despite the company posting record revenues. When a stock that has been the darling of a megatrend gets this beaten down, it often signals that selling pressure is exhausted. The CNBC article from July 7th confirms that traders were already betting on a big Nvidia rally even as the broader semiconductor sector dropped 5%, suggesting smart money was positioning for a bounce before the broader market panic hit. The combination of record-low valuation, resilient revenue, and existing institutional dip-buying creates a compelling contrarian setup. If the geopolitical fears ease even slightly, a stock this cheap with this much momentum potential could snap back hard.
Strategy approach
Build a rule-based strategy that enters long NVDA on D1 when NVDA is trading more than 15% below its 50-day moving average AND the stock's P/E ratio is at or below 25x trailing earnings. Add a second entry condition: NVDA must have closed green on a day when SMH (VanEck Semiconductor ETF) closed red. Exit after a 14-day max hold or 8% gain, whichever comes first. Use a 6% stop loss.