Nvidia Trades at 17x Earnings, Lowest Multiple in a Decade
Nvidia's valuation has compressed to 17 times forward earnings, its cheapest level in over ten years, despite projected 90% revenue growth for fiscal 2027.
Key points
- Nvidia trades at under 17x forward earnings, its lowest multiple in over a decade, down from 25x in May.
- Revenue and net income are projected to grow 90% and 99% respectively in fiscal 2027, accelerating from prior year growth.
- Gross margins are expected to drop below 72% in Q4 due to rising memory chip costs, while rivals like Intel gain over 180%.
Nvidia Corp is trading at its lowest valuation relative to earnings in more than a decade, signaling deep market skepticism about the sustainability of its recent profit surge. The stock currently trades at less than 17 times profit expected over the next 12 months, a multiple that is half the level it commanded in early 2025 and down from more than 25 times earnings estimates in May.
This de-rating has occurred despite a five-day winning streak for the shares, which followed a broad rebound in semiconductor stocks. The Philadelphia Stock Exchange Semiconductor Index, or SOX, jumped 4.3% on Monday after Meta Platforms Inc’s new AI agent boosted optimism about chip demand, though Nvidia remained little changed in Tuesday trading.
Profit Growth Outpaces Valuation Expansion
Fundamentals remain robust, with revenue and net income projected to jump 90% and 99% respectively in fiscal 2027, which ends in January. This represents an acceleration from the 65% growth recorded the previous year. In its second-quarter report, Nvidia guided for 70% sales expansion in fiscal 2028, significantly exceeding the 45% growth that had been previously anticipated by the market.
Margin Pressure and Competition Emerge
The discount on Nvidia’s stock is driven by rising costs for key components, particularly memory chips, which are squeezing profitability. While gross margin was 75% in the second quarter, analyst estimates suggest it will shrink to under 72% by the fourth quarter before rebounding. David Russell of TradeStation notes that this margin compression is a primary factor holding back share price gains.
Competitive threats are also intensifying as major customers develop in-house solutions to reduce reliance on Nvidia. Meta Platforms and Alphabet have both highlighted their proprietary AI chips, a trend that could weaken Nvidia’s market position over time. Despite this, CEO Jensen Huang recently described the company as the world’s first growth value stock, arguing that it is capturing more value while growing.
Lagging Peers in Semiconductor Index
Nvidia’s 22% gain in 2026 ranks second only to Apple among the Magnificent Seven, but it trails significantly behind other chipmakers. The broader semiconductor index is up nearly 77% this year, driven by Micron Technology, Intel, and AMD, which have each gained more than 180%. Nvidia is currently the fifth-worst performer in the SOX index, which trades at 20 times estimated profit.
