Nvidia (NASDAQ:NVDA | NVDA Price Prediction) might be 12% off its all-time highs from around three months ago, but, all the while, the valuation recently has sunk to depths not seen in around seven years. Indeed, the value case for shares of the fast-rising GPU gainer is really nothing new. Whether you look at the 31.7 times trailing price-to-earnings (P/E) or the 23.2 times forward P/E multiple, it’s not hard to make an argument for accumulating shares while they’re in a relatively cool spot.
Of course, if the semiconductor names fold, don’t expect shares of Jensen Huang’s $5 trillion empire to be spared. In any case, there’s no shortage of believers in the name, even as the stock chart starts looking far less attractive than in recent years. Duan Yongping of H&H International Investment actually added a huge position in the firm back in the first quarter.
A Magnificent bargain in the Mag Seven
While I understand concerns that the seemingly cheap (at least relative to the astronomical growth at gross margins that scream “too good to be true”) name might actually be a trap once hyperscalers finish their data center builds or start phasing out Nvidia hardware for their own custom silicon, there’s great uncertainty with the timeline. Until the hyperscalers spend less (it feels like they’ll spend more from here) and produce enough silicon to satisfy their own inference needs (chokepoints and demand will make this hard), Nvidia is bound to keep selling — and selling well.
Add Nvidia’s widening software moat into the equation, especially when it comes to the robotics platform it’s building up, and it’s hard to gauge how the transition will go as some piece of Nvidia finds itself in the robotic innovations of the future.
Is it an uncertain time for Nvidia as AI data center moves at a blistering pace while AI bubble fearers attempt to time a top? Most definitely. But, at the same time, there’s more than one way that Nvidia can continue knocking balls out of the park as the third or fourth innings of AI come along (some think we’re in even earlier innings in this AI ballgame).
Nvidia’s wins might not be limited to the early days of the AI boom
If the company can shift gears from a GPU vendor to an ecosystem platform for physical AI and agentics, maybe that 75% gross margin that’s more reminiscent of a software company isn’t going anywhere, at least not anytime soon. In any case, at close to 23 times forward P/E, shares of Nvidia already seem priced as a GPU vendor that’s already seen its best days. With the profound performance leaps to be had with Rubin and Vera, I’d say that’s far from the case.
The company has pulled the curtain on a number of breakthroughs in recent quarters. And while the market might not reward the stock accordingly, especially amid the latest upset in semis, I do think that it’s long-term investors who will ultimately be rewarded as Jensen Huang plays to his strengths. So, unless you’re an AI bubble believer, I do think that Nvidia shares stand out as one of the most undervalued large-cap names out there.
It’s hiding in plain sight at the very top of the market, but if the AI revolution goes as planned and firms start making serious money as they execute their AI game plans, perhaps envisioning Nvidia stock at $500 per share isn’t so much of a stretch. If Nvidia’s platform proves untouchable in the AI era, perhaps we could find ourselves paying a much higher multiple on shares, even once growth comes in.
The bottom line
If you own the hyperscalers, which are scrambling to cut Nvidia out of their stacks with their own custom silicon, I think you also have to own Nvidia in case the pushback doesn’t go as intended. Add recent open-source innovations (look no further than the Cosmos 3 world model platform) into the equation, and I think it’s clear that Nvidia is set to become an AI enabler that very few can keep pace with.
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