Is Nvidia a buy?

First off, chips are not my kinda thing unless they can be dipped in salsa and guacamole and eaten for an hour straight. OK, maybe just a half bag is enough.

But Nvidia, or as the Co likes to spell its name, nVIDIA, is chipmaker that Howard Lindzon likes. A lot. He's always bullish on great trendsetters, and Nvidia apparently fits the bill as a graphics chipmaker. The man's been right too often to ignore, but there is one tiny little question.

Is NVDA a buy here? Let's take a look.

• NVDA traded down today, when Nasdaq was down fractionally (2 points). NVDA lost 1.1% to $43.51.

• On Friday, when the market had its latest meltdown, shares tumbled 4.6% to $43.99 after the Co expressed concerns about supply constraints. Though the Co beat estimates for Q2, Merrill Lynch's Sidney Ho downgraded NVDA to neutral from buy. Ho noted that the Co's earnings potential for the next 12-18 months is already reflected in the stock price. Ouch.

• Co CEO Jen-Hsun Huang said the contract chipmakers are operating at close to full capacity, according to Marketwatch. CFO Marvin Burnett said that manufacturing constraints could lead to "some product limitations" in Q3.

• Stifel Nicolaus & Co analyst Blake Fischer also downgraded NVDA from hold to sell.

The positive numbers:

• Profit is up nearly 100% to $172 million.

• Quarterly revenue is up 36%, now $935 million compared to last year's Q2 of $687 million.

• Gross margins are up to 45% compared to 42%.

• The desktop line increased by 37% and notebook sales are up 129%.

The Co said that revenue would grow 5-7%, but didn't raise guidance. One analyst to upgrade the stock is Brian Piccioni of BMO Capital Markets, from underperform to outperform.

Obviously, the company's statement about revenue growth (5-7%) doesn't correlate with the massive buying of its stock. NVDA is up 53% since its recent low of $28 in early April.

Is NVDA a buy? Well, it has a great niche that its competitors (AMD, CREAF, INTC) haven't taken the lead on yet. The bigger question is, can NVDA outpace my favorite, A level stocks? Tough call.

Graphics are here to stay, and if NVDA stays ahead of the pack, it's a definite buy. The question then becomes, what is a good entry point? The stock is trading above its 50- and 200-day moving averages despite today's small pullback. I'd wait on NVDA and keep a close eye on the big dawgs like AMD and Intel. Once the stock consolidates into its moving averages, it is clearly worth a buy.

On a side note, Nvidia does have one of the coolest logos. They are, after all, a graphics company.

Pupule Paul has no positions in the companies mentioned.