Nvidia’s Stronghold on AI: Is the Stock Price Too Low?

Nvidia (NASDAQ: NVDA) has emerged as a powerhouse in the stock market, capitalizing on its leadership in artificial intelligence (AI). This market, currently valued at $200 billion, is projected by analysts to grow to $1 trillion by the end of the decade. The tech company has created a robust suite of AI products and services, encompassing hardware, software, networking tools, and more. These offerings cater to every stage of a customer’s AI journey. CEO Jensen Huang refers to Nvidia as the “on ramp” to the expansive world of AI.

Nvidia’s flagship products are its graphics processing units (GPUs), which excel in performing critical AI tasks such as model training and inferencing. Notably, major companies like Microsoft and Amazon are among its customers, driving Nvidia’s substantial earnings. In fact, Nvidia reported a remarkable triple-digit revenue increase, exceeding $130 billion in its most recent fiscal year, marking a significant milestone.

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The share prices have surged by 1,500% over the last five years. However, there comes a point when Nvidia’s stock was seen as overpriced by many investors. Recently, as stock valuations declined due to concerns about the overall economy, Nvidia’s valuation also dropped. Currently, the stock is trading at its lowest level in relation to forward earnings estimates in over a year. The question now is whether Nvidia’s stock has become too cheap to overlook. Let’s explore this further.

Image source: Getty Images.

From Gaming to AI: Nvidia’s Journey

To understand Nvidia’s success, it’s essential to look back at its history. Initially, this tech titan catered primarily to the gaming sector with its GPUs. However, as the potential of these chips became evident in other fields, Nvidia introduced the parallel computing platform CUDA to broaden its applications.

As GPUs transitioned into the AI realm, Nvidia’s popularity skyrocketed. For instance, Oracle co-founder Larry Ellison remarked last year that he and Tesla CEO Elon Musk dined with Huang and “begged” him for more chips due to soaring demand. This strong demand is evident with Nvidia’s latest product, the Blackwell architecture, which has experienced “insane” demand, according to Huang.

During its recent earnings call, Nvidia disclosed that Blackwell generated $11 billion in revenue in its first market quarter. Despite the launches of such complex and customizable products being costly, Nvidia managed to keep its gross margins above 70%, showcasing robust profitability.

Nvidia Facing Recent Challenges

Recently, Nvidia Stock has encountered several hurdles. A start-up named DeepSeek announced it trained its model using Nvidia’s lower-priced GPUs, raising investor concerns about potential revenue declines. Additionally, the Trump administration’s commitment to maintain, or even enhance, export controls on chips for China poses another challenge for Nvidia. Furthermore, the tariffs implemented by Trump on imports from three key trading partners increased fears about economic stagnation affecting companies like Nvidia, which produce goods outside the United States.

As a result, Nvidia’s stock saw a decline of about 14% over the past month, leading to a reduced valuation, with the stock now trading at just 24 times forward earnings estimates—its most affordable level in more than a year.

Is Nvidia Too Cheap Right Now?

Returning to our initial inquiry: Is Nvidia’s stock price too low, or do the challenges warrant caution in buying this AI leader? The concerns over DeepSeek may have lessened, especially as Nvidia’s major customers have expressed ongoing commitments to their AI investments with no indications of scaling back. For example, Meta Platforms plans to invest up to $65 billion in AI this year and aims to have 1.3 million GPUs by the year’s end.

Regarding the export controls, while these have affected Nvidia’s Chinese revenue since their implementation in 2022, the company continues to report significant revenue growth in other regions.

Concerning tariffs, while they may impact Nvidia and other U.S. companies, it’s crucial to remember that the current trade conflict is a temporary issue. Notably, Trump has delayed the tariffs on products aligned with the United States-Mexico-Canada Agreement, suggesting potential flexibility in their enforcement.

Overall, major indicators for Nvidia remain positive. The company has consistently reported strong earnings and maintains its market leadership. Given these factors, Nvidia appears to be undervalued at its current price, presenting a potentially advantageous opportunity for long-term investors.

Don’t Miss Out on this Potentially Lucrative Opportunity

Have you ever felt that you missed the chance to invest in top-performing stocks? If so, you need to pay attention.

Our team of analysts occasionally issues a “Double Down” Stock recommendation for companies on the verge of significant growth. If you think you missed out, now may be the time to purchase before the opportunity vanishes. The data is compelling:

• Nvidia: A $1,000 investment when we first doubled down in 2009 would now be valued at $292,207!*
• Apple: A $1,000 investment when we doubled down in 2008 would be worth $45,326!*
• Netflix: A $1,000 investment in 2004 would have grown to $480,568!*

Currently, we are issuing “Double Down” alerts for three exceptional companies, and a chance like this may not arise again soon.

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*Stock Advisor returns as of March 3, 2025

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook, and sister to Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. John Mackey, the former CEO of Whole Foods Market, which is an Amazon subsidiary, is also a board member. Adria Cimino holds positions in Amazon, Oracle, and Tesla. The Motley Fool has interests in and recommends Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool also has the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the author’s views and do not necessarily reflect those of Nasdaq, Inc.