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Nvidia (NASDAQ:NVDA) hardly flies under the radar and yet I reckon the tech giantâs stock looks amazingly cheap at the moment.
Donât believe me? Well, hereâs my reasoning.
Cheap as chips?
For the year ended 25 January 2026 (FY26), Nvidia reported diluted earnings per share (EPS) of $4.90, 67% higher than for FY25.
Based on its current (24 April) stock price of $199, it means the chip-maker has a price-to-earnings (P/E) ratio of 40.6. And despite growing so rapidly, its price-to-earnings growth ratio is 0.6, comfortably below the benchmark of one when looking for undervalued stocks.
However, itâs the future that really matters.
Looking ahead, the consensus of analysts is for massive EPS growth over the next three years:
- $8.17 (FY27).
- $10.77 (FY28).
- $13.24 (FY29).
Using these figures, the forward P/E ratio drops to 24.4 (FY27), 18.4 (FY28), and 15 (FY29).
For a company thatâs so embedded in the artificial intelligence (AI) revolution — and one thatâs growing rapidly â earnings multiples like these suggest Nvidia’s stock is astonishingly cheap at the moment.
Nvidia’s claimed benefits… are so good that even when the competitor’s chips are free, it’s not cheap enough.
Jensen Huang, CEO Nvidia
And I donât appear to be the only one who thinks it’s undervalued.
Of 70 Wall Street analysts, 65 have given the stock a Buy rating, four say Hold, and just one recommends Sell. Their 12-month price targets range from $140-$380, with a median of $268.
Could so many ‘experts’ be wrong?
Never make predictions, especially about the future
Of course, nobody knows for sure how AIâs going to impact our lives over the next few years. However, the direction of travel is clear. Billions are being spent on data centres, hardware and other infrastructure.
But Nvidia still faces a number of challenges. If AI spending slows then the group will be affected.
And itâs potentially a victim of its own success. Because it continues to deliver such impressive numbers, expectations continue to rise. When the market starts to cool (as history suggests it will) investors could take fright.
In January 2025, over $600bn was wiped off Nividaâs market-cap after DeepSeek claimed it had developed a high-performance AI model at a fraction of the cost of Western rivals.Â
Brian Jacobsen, chief economist at Annex Wealth Management, said at the time: “It could mean less demand for chips… and less need for large-scale data centres“.
What does this all mean?
Personally, I think these fears are overblown. Nvidia’s been described as the least replaceable company in the sector. Its chips and systems architecture are integral to AIâs continuing growth, no matter how the industry evolves.
And by continuing to invest heavily, itâs not resting on its laurels. The groupâs Vera Rubin platform is expected to deliver up to five times the performance of its existing chips. Production’s due to start in the second half of 2026.
The groupâs CEO, Jensen Huang, reckons it could reach $1trn of revenue by FY27 and achieve sales of $3trn “in the near future“. For context, revenue was $215bn in FY26.
For these reasons, I think the stock’s in bargain territory. And despite Nvidia having close to a $5trn stock market valuation, I believe itâs still worth considering.
The post With a forward P/E of 24.4, this US phenomenon looks incredibly cheap to me! appeared first on The Motley Fool UK.
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More reading
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James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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