Nvidia, the largest company globally with a market capitalization of approximately $4.5 trillion, is garnering attention for potentially being one of the most undervalued stocks in the artificial intelligence (AI) sector. Despite common assertions from analysts claiming the company is overvalued, these opinions primarily stem from Nvidia’s trailing price-to-earnings (P/E) ratio of around 45.5. This figure may appear high; however, forward estimates for 2026 suggest a significantly lower P/E ratio of below 25, coupled with a price/earnings-to-growth (PEG) ratio under 0.7, which is seen as indicative of undervaluation since figures below 1 are typically viewed as a signal of a bargain.
Beyond its valuation metrics, Nvidia boasts approximately $52 billion in net cash and securities, alongside a forecasted $85 billion in free cash flow for the current year. These financial indicators underscore Nvidia’s robust market position, suggesting that its growth trajectory warrants these seemingly lofty valuations.
As an AI infrastructure leader, Nvidia’s financial performance has been impressive. In the last quarter, the company reported a staggering 62% year-over-year revenue growth, with figures nearly tenfold higher than two years ago. Adjusted earnings per share also saw an uptick of 60% year-on-year. Looking ahead, Nvidia projects a revenue increase of 65% for fiscal Q4, estimating revenues will reach $65 billion.
Furthermore, the firm’s outlook for 2026 is bolstered by significant investment commitments in data infrastructure from major cloud computing companies, as well as rising budgets from tech giants like Meta Platforms and OpenAI. A notable shift occurred when the U.S. government agreed to allow Nvidia to sell its newly developed H200 chips to approved commercial clients in China, reversing a prior ban on its H20 chips. This approval is expected to augment Nvidia’s sales considerably, especially since the U.S. will receive a 25% cut from sales.
Looking towards the medium term, Nvidia projects that data center capital expenditure could reach $4 trillion by the end of the decade. As the primary supplier of chips utilized for AI workloads, Nvidia is positioned to capture a significant portion of this anticipated spending, with a considerable share dedicated to chips and networking components.
The company’s competitive edge lies in the comprehensive ecosystem built around its graphics processing units (GPUs), initially designed to enhance graphics rendering for video games. Nvidia further extended its capabilities by developing the CUDA software platform, enabling developers to easily program its chips for a variety of tasks. This strategic move has led to widespread adoption, as most foundational AI code is now written within the CUDA framework, optimizing it for Nvidia’s GPUs.
To bolster their offerings, Nvidia ventured into networking, creating the proprietary NVLink interconnect systems that allow its chips to seamlessly share data and memory, operating as a cohesive unit. Consequently, Nvidia commands over 90% of the market share in the data center GPU sector—one of the fastest-growing markets in recent history. Despite emerging competition, Nvidia’s scale, expansive ecosystem, and chip flexibility position it for sustained leadership in the market.
Projections indicate that Nvidia could potentially achieve earnings of around $20 per share by fiscal 2030, assuming a consistent but gradual revenue growth trajectory. With anticipated revenue figures increasing significantly over the next decades, there is speculation that Nvidia remains one of the most attractive investment opportunities within the AI sector, especially as the ongoing AI infrastructure boom continues to unfold. The company’s stock is considered a potential must-own for investors looking to capitalize on the expanding AI landscape.
