Is Nvidia Stock Too Cheap to Ignore Right Now?

Nvidia shares are down 14% from their May all-time high and have lagged over the past month despite rising profit expectations. The article argues valuation support—NVDA is cited at ~16x next year’s earnings (vs ~23x this fiscal year)—suggesting the stock is near forward-multiple lows even as revenue has accelerated for three consecutive quarters, including a 85% top-line jump in fiscal Q1. Key risks mentioned include China/DeepSeek competitive pressure (85% faster inference without new hardware) and AI chip competition/trade restrictions, but the piece frames the selloff as potentially overdone given analyst estimates continuing to rise.

Analysis

NVDA’s recent derating looks more like positioning fatigue than a deterioration in earnings power. When a leader with accelerating estimates trades near its low end of forward multiples, the market is signaling that it is underweight the durability of AI capex rather than pricing in a true demand break. The second-order readthrough is that the beneficiaries of the next leg may not be the obvious “AI names,” but the infrastructure layer with cleaner order visibility: TSM, AVGO, and the broader SOXX basket should keep absorbing capital even if leadership rotates within semis.

The key near-term risk is not competition per se; it is a pause in hyperscaler spend or a guide-down on shipment timing that would keep the stock cheap for another 1-3 months. The falsifier is any evidence of Blackwell ramp slippage, weaker gross margin, or a meaningful cut to 2025 capex plans from the largest cloud buyers. Over 6-18 months, however, efficiency gains in inference are more likely to expand usage than reduce total compute demand, which argues that model-improvement headlines are a demand multiplier, not a capex killer.

Consensus is probably overstating the importance of “do more with less” narratives. If customers can lower cost per token, they usually run more workloads, which is structurally supportive for NVDA’s unit demand even if ASPs compress modestly. The overdone part may be the market’s willingness to pay a mid-teens multiple for a business still compounding earnings faster than the index; the underdone part is the probability that estimate revisions keep drifting higher and force a re-rating before the next fiscal year rolls around.

Key Decisions for Investors

• Add NVDA on further weakness or a 5-8% pullback over the next 2-4 weeks; view the setup as a valuation dislocation rather than a broken growth story, with upside driven by estimate revisions more than multiple expansion.
• Buy NVDA Jan-2026 140/180 call spreads on any post-earnings or macro-driven dip; defined risk, attractive if the stock mean-reverts toward prior highs as forward estimates continue rising.
• Pair trade: long NVDA / short AMD over the next 1-3 months if the market keeps rotating within AI semis; thesis is that NVDA preserves pricing power while AMD remains more exposed to substitution risk and sentiment volatility.
• Use SOXX as a proxy hedge: if hyperscaler capex commentary weakens, cut beta by shorting SOXX against a smaller NVDA long rather than exiting the name entirely.
• Watch item, not trade yet: if next quarter guidance implies shipment or margin deceleration, reassess immediately; that would be the first credible signal that the low multiple is earned, not temporary.