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Wondering if NVIDIA still has room to run, or if the market has already priced in all the good news? You are not alone. Plenty of investors are asking the same question right now.
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NVIDIA’s shares have climbed 8.9% in just the past week, with a 46.7% gain so far this year and an impressive 1,335% growth over three years. This places the company in the spotlight for both opportunity and risk.
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Much of the recent attention can be traced to increasing demand for AI and accelerated computing. Major announcements about new chip launches and partnerships with leading cloud providers have drawn investor interest. Regulatory discussions around AI and tech sector volatility have also shaped sentiment and contributed to NVIDIA’s high-profile stock moves.
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On our valuation checks, NVIDIA scores just 2 out of 6 for being undervalued. It is worth examining what that really means, how the numbers compare to popular valuation methods, and why a different approach to understanding NVIDIA’s value may offer new insights as you read further in the article.
NVIDIA scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow (DCF) analysis estimates a company’s intrinsic value by projecting future free cash flows and discounting them back to their present value. This approach helps investors determine what a business is fundamentally worth based on its capacity to generate cash over time.
For NVIDIA, the current free cash flow stands at $72.3 Billion. Analyst estimates suggest substantial annual growth over the next five years, with projections reaching $249.2 Billion by 2030. The first five years of these forecasts are based directly on analyst input, while subsequent years are extrapolated by Simply Wall St to reflect ongoing performance.
According to the 2 Stage Free Cash Flow to Equity DCF model, the intrinsic value per share is calculated at $141.22. This is 43.7% lower than NVIDIA’s current share price, which indicates the stock may be significantly overvalued at the moment.
In summary, while NVIDIA’s cash flow outlook is strong, the DCF model suggests that much of the company’s long-term growth potential is already reflected in the current share price.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests NVIDIA may be overvalued by 43.7%. Discover 831 undervalued stocks or create your own screener to find better value opportunities.
The Price-to-Earnings (P/E) ratio is the preferred valuation multiple for profitable companies like NVIDIA because it directly links a company’s share price to its underlying earnings. For businesses generating significant profits, the P/E ratio offers a quick snapshot of how much investors are willing to pay for each dollar of current earnings, making it useful for comparing across companies and sectors.
It is important to remember that growth expectations and risk play key roles in determining what a “normal” or “fair” P/E ratio should be. Rapid earnings growth or strong future prospects often justify higher P/E ratios. Higher risk or slower growth typically call for lower multiples.
Looking at NVIDIA’s numbers, the company currently trades at a P/E ratio of 56.93x. This is well above the semiconductor industry average of 37.74x and slightly below the peer group average of 72.96x. To provide a more tailored benchmark, Simply Wall St calculates a “Fair Ratio” of 60.47x based on NVIDIA’s growth, profitability, industry, risks, and market cap. Unlike basic peer or industry comparisons, the Fair Ratio adapts to company-specific factors and offers investors a more nuanced gauge of whether the stock is trading at a reasonable valuation.
Comparing this Fair Ratio to NVIDIA’s current P/E multiple, the stock appears to be valued about right, as the difference is less than 0.10.
Result: ABOUT RIGHT
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1394 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives.
A Narrative is a simple, powerful tool that lets you connect your personal perspective on a company to the numbers by combining your own story about NVIDIA’s future with forecasts for key drivers like revenue growth, profit margins, and risk.
Rather than just crunching formulas, a Narrative allows you to articulate why you think NVIDIA deserves a specific valuation. It ties together the company’s market position, growth potential, industry risks, and your expectations for its performance.
On Simply Wall St’s popular Community page, you can easily create and share your Narrative alongside millions of other investors. Narratives make it easy to track how your fair value compares to NVIDIA’s current price and help you decide when a stock looks attractive to buy or too expensive to hold.
What makes Narratives especially powerful is that they update automatically. When new news, earnings, or events affect NVIDIA, your assumptions and fair value are refreshed instantly so your view always stays relevant.
For example, different investors have reached fair values on NVIDIA ranging from as low as $67.95 per share to as high as $341.12 per share. The variation depends on whether they see NVIDIA retrenching to “normal” multiples or continuing its run as a legendary AI leader, with many holding views in between.
For NVIDIA, however, we’ll make it really easy for you with previews of two leading NVIDIA Narratives:
🐂 NVIDIA Bull Case
Fair Value: $218.51
Current Price is approximately 7.2% below this fair value
Forecast Revenue Growth: 27.08%
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Accelerating adoption of advanced AI and platform innovation is fueling substantial and sustained revenue and earnings growth, which strengthens NVIDIA’s long-term market leadership.
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Expanding full-stack offerings and deepening customer lock-in support robust margins and recurring, diversified revenue streams, despite sector cyclicality.
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Risks include regulatory uncertainty (notably US-China tensions), vertical integration by major customers, and ongoing supply chain or infrastructure constraints.
🐻 NVIDIA Bear Case
Fair Value: $67.95
Current Price is approximately 198.7% above this fair value
Forecast Revenue Growth: 14.4%
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NVIDIA’s dominance faces emerging threats from increased competition (AMD, Intel, Samsung) and customer vertical integration, which may erode margins and market share.
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An expected oversupply of compute power, customer in-house chip development, and cyclical hardware demand could result in shrinking profitability and a downward re-rating of valuation multiples.
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The bull run may flatten as hyperscaler demand normalizes, while product innovation and new use cases remain critical to sustain long-term earnings growth.
Do you think there’s more to the story for NVIDIA? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include NVDA.
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