Nvidia Stock Is Down 17% From Its High. Is the Artificial Intelligence (AI) Leader Finally Cheap?

The article argues Nvidia’s pullback (~17% since May) could reverse as AI infrastructure spending accelerates and multiple earnings catalysts approach in July. It highlights that the “big four” AI hyperscalers plan ~$650B of data-center capex this year and >$1T next year, and notes Nvidia trades at 21.7x forward earnings (about in line with the S&P 500). Key reads include expected AI spending/monetization commentary from Microsoft (FY2027 capex guidance) and TSMC results tied to strong AI semiconductor demand, which the author expects to support Nvidia’s next rally toward all-time highs.

Analysis

The market’s real question is not whether AI capex stays high; it is whether the next round of hyperscaler guidance proves the spend is still accelerating rather than just shifting mix. If Microsoft’s FY27 plan does not inflect meaningfully, the current multiple is vulnerable because NVDA is priced for continued share capture plus no meaningful deterioration in power, networking, or custom-silicon substitution.

TSM is the cleaner confirmation vehicle than NVDA because it monetizes the same demand signal with less narrative premium. A strong AI revenue print from TSM would also lift the whole advanced-packaging and foundry complex, but the second-order winner may be semiconductor equipment and substrate suppliers as the bottleneck moves from GPU availability to upstream capacity and yield. Conversely, if capex commentary is strong but not broad-based, the upside in NVDA can be narrower than bulls expect because a growing share of dollars can leak to custom ASICs, networking, and datacenter infrastructure.

The contrarian point: the article treats forward earnings parity with the index as cheap, but this is still a concentrated hardware franchise with customer concentration and cyclical end-demand. The near-term setup can work as a reflexive squeeze, yet 6-18 months out the main risk is multiple compression if growth merely stays good instead of re-accelerating. The thesis is falsified quickly if MSFT’s capex guide is flat to down or if TSM’s AI revenue commentaries imply digestion rather than expansion.

Key Decisions for Investors

• Buy TSM into July earnings as the cleaner AI-capex confirmation trade; if AI revenue and margins surprise up, expect a faster first-day re-rate than NVDA because the stock carries less narrative premium.
• Use NVDA only through a defined-risk late-August call spread, not outright size, to play the potential squeeze; this is a 4-8 week catalyst trade, not a high-conviction long if July guidance disappoints.
• Pair long NVDA / short AMD over the next 1-2 months if hyperscaler commentary confirms accelerating GPU spend; this isolates share-gain and ecosystem durability while capping broad AI-factor beta.
• Set a hard alert on Microsoft FY27 capex guidance: if it fails to materially step up versus current run-rate, trim NVDA/TSM exposure immediately because the July setup becomes a fade rather than a break-out catalyst.