I’m a type of smug buyers who purchased Nvidia (NASDAQ:NVDA) inventory within the early days of the bogus intelligence (AI) revolution. Regardless of this, my good points stay unrealised and my revenue fluctuating wildly. That’s as a result of the inventory, together with many different US tech firms, have turn out to be extremely risky, with a lot of the stress being downwards.

Nevertheless, with that in thoughts, many buyers, myself included, at the moment are asking themselves whether or not Nvidia inventory is undervalued. Let’s take a better have a look at the info.

Valuation conundrum

Nvidia is beginning to look lots cheaper on a easy trailing price-to-earnings (P/E) ratio. The inventory is buying and selling 33.6 occasions trailing earnings. That’s the bottom it’s been in 5 years. Historic averages don’t inform us the whole lot, however that’s a extremely essential one to remember.

Nevertheless, this determine doesn’t give us the entire image. The extra essential metric is the ahead P/E ratio, which presently sits at 21 occasions. This demonstrates that the corporate is continuous to develop earnings — at the least in line with the forecast.

Actually, the anticipated common earnings development charge over the medium time period is 35%. In flip, this leads us to a P/E-to-growth (PEG) of 0.62. Whereas the trailing P/E and the ahead P/E could level to relative premiums versus the knowledge expertise common, this PEG ratio is a 53% low cost to the typical.

In fact, right here lies a danger. The inventory’s premium on near-term metrics and low cost on long-term metrics means that the corporate is valued on future development. What if that development doesn’t come? That’s when the share price may come crashing down.

Constructing on the above, we will additionally see that the inventory hasn’t traded so low cost on a price-to-sales foundation for the reason that AI revolution started in earnest.

Does all of it come crashing down?

Nvidia has established a commanding lead within the AI chip market. Its accelerators maintain between 70% and 95% of market share, pushed by its superior GPUs and the entrenched CUDA software program ecosystem. Nevertheless, there’s been numerous noise in 2025. This empire may come below stress.

Chinese language newcomer DeepSeek has emerged as a major disruptor, introducing AI coaching strategies that might cut back reliance on Nvidia’s specialised chips and problem the CUDA ecosystem. In the long term, extra environment friendly AI fashions may cut back demand for Nvidia’s chips.

What’s extra, geopolitical components additionally loom giant. President Trump’s often-changing tariff insurance policies have injected volatility into the tech sector, with specific uncertainty round chip parts and exemptions. Whereas Nvidia has introduced plans for US-based manufacturing to mitigate tariff dangers, the corporate’s international provide chain stays uncovered to coverage shifts and export restrictions.

Furthermore, competitors from friends like AMD is intensifying as effectively. Time will inform if AMD is ready to take some market share away from Nvidia.

So, there are a number of components that might hinder Nvidia’s progress. Nevertheless, the present earnings forecast and the PEG ratio counsel the inventory is undervalued. It’s a combined image. I’m a little bit tempted to purchase extra, however the inventory is so risky. I’ll preserve my powder dry for now.