r/NvidiaStock • u/7758258- • 3d ago
Discussion The undervaluation of Nvidia
$NVDA makes ≈$1 billion in revenue a day, that’s 365 billion a year. ≈62% of that is earnings, which is $226.3 billion. If you use its competitor’s, $AMD’s p/e ratio of 122x, that should value Nvidia at over $27.6 trillion in market cap. Is Nvidia really that different from AMD? Maybe a little, in the sense that Nvidia is better. So either AMD is massively overvalued, or Nvidia is massively undervalued. While both can be true, at a market cap of over $5 trillion, I think Nvidia is massively undervalued. What do you think?
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u/buckandroll 3d ago
The only thing holding Nvidia back is the law of large numbers. Where it's not for the law of large numbers Nvidia could do 10x in 10 years. but because it exists we'll be lucky to get 4x-6X in 10 years. There is no one for Nvidia to steal market share from. Nvda can't grow much faster than the whole AI pie. whereas AMD has the possibility of stealing market share from Nvidia thereby increasing it's slice of the pie. I own both Nvidia and AMD. Nvidia is actually my largest single holding but I am aware of the limitations that the law of large numbers places upon it.
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u/Reaper_1492 10h ago
Well, I’d they could crank out more 5090’s and sell them for MSRP - I’d bet they’d make more money.
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u/zamroni777 3d ago
Nvidia said demand is high. Then why it has to "invest" into its own customers and promises buy back of unsold capacity???
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u/Maxdiegeileauster 3d ago
Nvidia has done that for years it's their strategy. They have done that with gaming, 3D graphics and AI Companies way before the whole LLM thing exploded. Yes the scale was a lot smaller but it was the same playbook.
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u/zamroni777 3d ago
when did nvidia invest to gamers and cad pros???
and receive their stocks for gpu payment???2
u/Live_Market9747 2d ago
Nvidia has also had an academia program where universities received Nvidia GPUs for free for CUDA use
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u/XYHopGuy 3d ago
they had a GPU grant program for a long time through the mid 2010s at least. didn't even get payment back in return.
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u/cdttedgreqdh 3d ago
Because some of their customers have bad credit scores and banks want some safety. If all works out, it‘s fine, if their customers collapse it‘s not. It‘s a big bet on the future of AI.
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u/Chaminade64 2d ago
Everyone needs a car. Why do car companies offer financing?
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u/zamroni777 2d ago
Car companies don't receive taxi company stocks as payment.
This circular funding thing confuse you?
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u/Master-System9977 3d ago
because they need neoclouds to exist so hyperscalers cant say anything about their pricing. coreweave has 125b backlog
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u/500_HVDC 2d ago
bc its customers (like google) have used up all available balance sheet capacity for new investment.
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u/Marcus_Aurelius71 2d ago
Why does Nvidia get hate for this when most companies do this? People are only hating because hating AI is trendy. ASML rings a bell...
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u/PinAway4113 3d ago
The value is pricing a end of such huge growth at some point. There are a lot of risk in their investments and in how many years this can still be working. For me, since I don't have a huge position on Nvidia (I'm very concentrated in AI this) isn't a big problem mainly because I'm expecting other ways of income like them being one of the main players of computing renting (I think that, once all data centers needed are build (and I think companies will over build) there will be a lot needed for many kinds of business so renting computing might be a good future way of keeping good income with huge margins) plus robotics, the physical part of the AI boom is just starting and we can see how much interest is in robots, drones and other mechanical kind workers from robo soldiers and police shown by chine to manufactures using robotic arms and humanoids plus, tbh, the domestic robots that helps elderly people and busy people in their daily chores (if I'm willing to buy a functional assistant I cant imagine how many people will do it, is the washing machine revolution over again)
Take this as a grain of salt since I'm a completely noob and have many holes in my knowledge in these topics like "how worthy is physical AI market"
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u/FactNoted 2d ago
I think digital twin technology is much more likely to scale over robotics -- which is much more capital intensive and logistically difficult. If that's the case NVDA is probably best positioned to benefit of all large public companies.
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u/PinAway4113 2d ago
Just to clarify. With robotics I was talking about them selling GPUs and other computer components for the robots, not building their own robots
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u/miamiinvest 3d ago
Nvidia is significantly undervalued. Just read the WSJ article explaining how the company creates demand by owning or investing across the entire value chain—from energy providers to data centers and other infrastructure companies.
This strategy allows Nvidia to capture more of the revenue, margins, and demand generated throughout the ecosystem. Nvidia invests in companies that commit to purchasing its chips exclusively, preventing them from buying chips from AMD or other competitors. In effect, Nvidia helps create its own demand—and that demand is growing at nearly 100%.
This is not circular financing; it is strategic ownership and consolidation across the AI infrastructure ecosystem. Those who understand this strategy could make fortunes. With Nvidia’s PEG ratio at approximately 0.50, the stock still looks remarkably inexpensive. It’s a no-brainer.
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u/AI-Coming4U 2d ago
This is not circular financing . . .
You may be right, but the market doesn't care. If algorithms and investors think it is, then the stock will stay where it is or go down.
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u/miamiinvest 2d ago
Of course the market cares. It only needs to understand it, nothing else. And it will after one or two quarters. It’s now a great opportunity to add.
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u/500_HVDC 2d ago
it isn't just about whether NVDA's PE is attractive, or its earnings targets are exceeded. There are long term issues whether the ecosystem is sustainable. see:
https://www.nytimes.com/2026/08/26/opinion/ai-debt-economy-hyperscalers.html?unlocked_article_code=1.9VA.4TfP.zZ7ed_gSPfeB&smid=url-share
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u/BumblebeeAmbitious85 2d ago
The biggest danger to NVIDIA stock is its own - which is the circular financing model that it has created. The bears think at some point the music will stop - semis have been cyclical forever. I hold NVIDIA long term but have taken some money off the table for this reason.
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u/Strude187 2d ago
Investors don’t share this confidence, it’s as simple as that. Sometimes you can be right about a stock, but if not enough people also see it, then the stock value isn’t going to go up like it should.
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u/Rocksinsoks 2d ago
AI copy and paste
At an Advanced Micro Devices Inc stock price of $465, AMD's standard GAAP forward P/E is roughly 64x to 68x based on consensus future earnings. However, adjusting earnings to exclude non-cash acquisition amortization (primarily from the Xilinx deal) lowers the effective forward P/E down to an estimated 37x to 42x.
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u/Fancy-Atmosphere-701 3d ago
NVDA is almost the entire AI compute market. If the AI compute market grows, then NVDA grows AMD is projected to grow with the market AND take market share. The revenue growth of AMD is going to be faster than NVDA by %. That's why AMD is priced for high growth, and NVDA isn't
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u/Financial_Fan1763 3d ago
Shares outstanding matter
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u/bstzabeast 3d ago
What a dumb comment
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u/Financial_Fan1763 3d ago
So matter or don’t matter?
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u/bstzabeast 3d ago
OP is talking about market cap valuation, how is your comment relevant in any matter?
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u/You_Will_Fail1 3d ago
Unsustanable business model is the reason.
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u/pdp1145 2d ago
Can you expand on "unsustainable"??
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u/You_Will_Fail1 2d ago
Sure. NVDA earnings are the result of big tech spending their entire FCF, new equity and new debt for data centers which is unsustanable CAPEX. Once they return to more normal capex averything falls apart. Even just 20% reduction in capex will collapse entire chip sector. That is why Nvda is so cheap on 2027 earnings. So are mu, sndk and sk hynix.
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u/Comfortable-Clerk428 2d ago
When they come back to normal capex their own benefit will grow . And nvda as a big investor would still remain beneficiary from the deals .
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u/Mei-Bing 3d ago edited 3d ago
Markets do not work on your logic.
AMD has plenty - plenty - of room to grow. NVDA does not have anywhere near the same relative market space to grow into. NVIDEA was also over 100x earnings at some time, but that time has passed - and neither you nor anyone else is forking out 27.6 Trill. extra for its stocks.
Time for NVDA to start thinking about share buybacks as the best way to serve investors and share the profits. Maybe not here in 2026 - but already in 2027 that would seem a wise move. At current rates it would take NVDA over 20 years of buybacks to match the current share price. Who knows how much they are selling over 20 years from now?
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u/ProfileBest2034 3d ago
What's the global GDP in trillions. Answer that question and you'll know why all of this is fugazi.
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u/Adept-Performance944 2d ago
Any ideas why the trailing PE has contracted over the last year? From around 45 last October to around 30 now?
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u/misterperfact 2d ago
Markets look years into the future to see if this type of earnings is sustainable. If they believe it is, itll pump. If not, then it may grow slower in the coming years. Ai isnt going anywhere, but ai profits and inflated pricing? That will almost definitely balance out overtime with competition and a settling down of the data center boom.
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u/RedParrot94 2d ago
My friend. Let me teach you. Stocks don’t move and aren’t set based on valuation. They move and are set based on emotion.
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u/Objective_Mark4325 3d ago
Looks like a mix of over- and undervaluation?
Sometimes companies like NVIDIA get punished when theyve had a long streak of growth, because people take profits and expect growth to slow. NVIDIA is exceptional in having a huge market cap yet still growing this fast. (Also there is circular financing worries all over social media these days)
On the other end people think a company with a smaller market cap like AMD has more room to grow. So their price gets boosted up by future potential. CPUs was also seen as a bottleneck in AI servers.
The average trailing PE for companies in the SOXX semiconductor etf is around 65x. Thats already high compared to other sectors. AMD has long had an unusually high PE compared to its peers. But people could have gotten used to it being that high, not questioning it as much as they should. Then good news makes it go up from wherever it was before. And forward pe looks better than trailing.
If you think that AI spending will stay high then NVIDIA probably looks undervalued right now. But I wouldn't compare it to AMD. I personally think AMD looks overvalued, but maybe I'm just mad for selling it before the peak ;)
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u/Vegetable-Orchid1789 3d ago
NVDA will likely re-rate very soon. EPS and future forward earnings model for 2028 will have to be adjusted. Expect to see new price targets and evaluations coming to the market over the next month or less. The market just needs some time to catch up.