Nvidia (NASDAQ: NVDA) may be one of the most undervalued large-cap stocks in the market right now, despite its enormous size and profile.
The chipmaker regularly trades places with Apple (NASDAQ: AAPL) for the title of the world’s largest company, yet its valuation tells a surprisingly different story.
At 30 times trailing earnings, Nvidia is actually cheaper than Apple, which currently trades at 41 times trailing earnings, a notable gap given their respective growth rates.
Nvidia posted 85% revenue growth in its latest quarter, while Apple recorded a comparatively modest 17% growth rate over the same period.
Perhaps the most striking valuation signal is that Nvidia’s forward price-to-earnings ratio of 21.9 times is nearly identical to the S&P 500, which trades at 21.1 times forward earnings.
That means the market is essentially pricing Nvidia as an average company, even as Wall Street analysts project 42% revenue growth for the chipmaker next year.
The mismatch between Nvidia’s growth trajectory and its current valuation is what makes the stock look historically cheap, particularly when compared to other mega-cap peers.
Since the AI build-out began in 2023, Nvidia’s stock has not traded this inexpensively relative to its earnings potential at any point during that period.
The broader concern weighing on Nvidia’s stock is market skepticism around AI spending levels, with fears growing that a bubble may be forming across the sector.
However, the major AI hyperscalers have consistently told investors that the risk of underspending on AI infrastructure is greater than the risk of overspending, and they continue to raise capital expenditure guidance.
Nvidia has projected that AI hyperscaler data center capital expenditures will reach $1 trillion in 2027, with that figure expected to climb to between $3 trillion and $4 trillion worldwide annually by 2030.
These worry cycles around AI spending are not new, and several have played out since the build-out began, with the market eventually returning to a bullish stance each time.
As AI hyperscalers report earnings over the coming weeks and Nvidia itself reports at the end of August, the current wave of skepticism may begin to lose momentum.
The one scenario that could change the bullish outlook for Nvidia would be a genuine pullback in AI hyperscaler spending commitments, though no such indications have emerged so far.
For investors looking for exposure to the AI infrastructure boom, Nvidia’s current valuation relative to its growth projections presents a compelling case for building or adding to a position now.
