Is Nvidia Stock a Bargain?

Nvidia's stock has underperformed in 2025 despite strong Q1 fiscal 2026 results, with revenue surging 69% to $44.1 billion, driven by Blackwell architecture adoption and gaming revenue growth; concerns over U.S. export controls to China, resulting in a $4.5 billion charge, have weighed on the stock, but data center revenue growth of 73%, largely from Blackwell products, demonstrates resilience and suggests global demand is offsetting Chinese restrictions, positioning Nvidia as a compelling long-term value despite a valuation of 21.8 times projected 2028 earnings.

Analysis

Nvidia's stock performance in 2025, exhibiting a modest 2.3% year-to-date return, significantly trails its powerful financial results, highlighted by a 69% year-over-year revenue increase to $44.1 billion in its first quarter of fiscal 2026. This divergence, especially when the S&P 500 has only gained 0.32%, raises questions for investors, particularly given the company's guidance for sustained robust growth. The primary drag on the stock appears to be concerns over U.S. export controls to China, effective April 9, 2025, which resulted in a $4.5 billion Q1 charge and are projected to reduce revenue by $2.5 billion in Q1 and $8 billion in Q2 due to lost H20 chip sales. Nevertheless, Nvidia's ability to still post $44.1 billion in Q1 revenue and guide for $45 billion in Q2—a 50% year-over-year growth even accounting for these China-related impacts—underscores its operational resilience. This strength is further evidenced by its data center revenue, which surged 73% year-over-year to $39.1 billion, with the new Blackwell architecture products accounting for nearly 70% of this total. Gaming revenue also contributed positively, with a 48% sequential and 42% year-over-year increase, largely driven by new Blackwell-based gaming products. The rapid uptake of the Blackwell architecture, alongside Nvidia's dominant CUDA software platform, suggests that global demand outside of China is more than compensating for the restrictions. At 21.8 times projected 2028 earnings, the valuation is positioned as reasonable for a company demonstrating such growth and market leadership in AI infrastructure, potentially offering a compelling opportunity for investors focused on long-term fundamentals.

Key Decisions for Investors

• Investors should weigh the current muted stock price against Nvidia's strong Q1 fiscal 2026 financial performance, including 69% revenue growth and positive forward guidance, as a potential misalignment offering opportunity.
• Carefully assess the impact of Chinese export restrictions, noting that despite a $4.5 billion Q1 charge and significant projected revenue loss from China, the company's overall growth trajectory, particularly the 73% year-over-year increase in data center revenue fueled by global Blackwell adoption, demonstrates substantial offsetting demand.
• Monitor the ongoing adoption rate and revenue generation from the Blackwell product cycle, as its rapid uptake in both data center and gaming segments is a critical validation of Nvidia's continued technological leadership and growth engine.
• Evaluate the current valuation of 21.8 times projected 2028 earnings not just against traditional metrics but in light of the company's significant growth rate, dominant market share in AI, and the competitive moat provided by its CUDA ecosystem, while acknowledging that some external analyses may differ on its immediate buy recommendation.