NVIDIA Misjudged by the Market? Valuation Hits Five-Year Low, Forward P/E Cut in Half, Competitive Threat Overpriced

BlockBeats News, July 25th, according to BIT (bit.com) market data, NVIDIA's stock price has only risen by 10% this year, becoming the most disappointing heavyweight stock in the sector against the backdrop of a 71% surge in the Philadelphia Semiconductor Index. Morningstar analyst Brian Colello pointed out that the current price of around $212 implies that NVIDIA will have almost no growth after 2027, while analysts believe NVIDIA's fair value is close to $280, about 16 times the expected sales for the 2029 fiscal year.

NVIDIA's current EBITDA-based forward P/E ratio is around 17 times, far below the five-year average of 36 times, and at its lowest range since July 2021. Competitor AMD has a forward P/E ratio of 53 times, with a year-to-date increase of 142%. Gabelli Funds portfolio manager John Belton stated that investors are currently pursuing targets with the strongest supply-demand imbalance and untapped growth opportunities, none of which NVIDIA currently meets.

The bearish logic on NVIDIA is based on emerging challengers and scale ceilings: startups such as SambaNova and Cerebras are launching self-developed chips, while Google, Amazon, Meta, Microsoft, OpenAI, and Anthropic are all advancing their in-house plans. AMD's first AI server rack system, Helios, will ship later this year, directly competing with the Grace Blackwell and Vera Rubin series. NVIDIA bulls, on the other hand, believe that NVIDIA's expected revenue will grow by 42% to $560 billion in the next fiscal year, followed by another 23% increase the year after, far surpassing AMD's projected $78 billion volume in 2027. The more than double valuation premium is difficult to explain with just a difference in growth rates. More importantly, NVIDIA's share in the inference chip market has actually increased; its countercyclical resilience is also underestimated—once AI investments cool down, many companies that have just ventured into chip self-development may abandon it and return to the NVIDIA ecosystem, making the impact of an AI winter on NVIDIA potentially smaller than on emerging chip designers. Colello expects NVIDIA's revenue and adjusted EPS growth rates to exceed 45% per year by the 2029 fiscal year, and believes the market has already priced in the competitive threats excessively.