Is Nvidia Stock a Buy Now?

Following a weak start in 2025, shares of Nvidia (NVDA) have made a strong comeback over the past three months. After touching a 52-week low on April 7, the tech giant has soared an astounding 69% since then, making it the first company globally to reach a market capitalization of $4 trillion.

It’s no wonder that Nvidia’s latest surge occurred; after all, its previous drop this year appeared unjustified given the impressive growth it has maintained thanks to the robust demand for its AI processors.

On the other hand, investors might be questioning whether purchasing additional shares of Nvidia is a good idea given its recent surge. Let’s explore this possibility.

Nvidia is trading at a rich valuation once again

Over the last few months, Nvidia’s stock price has significantly increased, making it appear costly. As shown in this graph, this upward trend suggests that it might be overpriced currently.

Back in early April, I couldn’t believe my luck when I discovered this rapidly expanding company was offering a fantastic deal with its trailing P/E ratio in the low 30s – significantly lower than its typical five-year average earnings multiple of 70! The forward P/E ratio of less than 25 made it even more enticing. This tech titan was trading at a discount compared to the average earnings multiple of the Nasdaq-100, which was 32 at that time. Smart investors who snatched up the stock then are now reaping impressive returns, as I am witnessing myself!

Nvidia maintains the potential to continue justifying its high valuation and providing further returns to investors, thanks to the numerous opportunities it has at hand. These opportunities span across AI processors, enhanced computing, cloud gaming, and enterprise software. By tapping into these multibillion-dollar markets, Nvidia is poised to sustain robust growth for an extended period.

Investors would do well to look at the bigger picture

Analyst predictions indicate that Nvidia’s revenue is expected to jump by approximately 53%, reaching nearly $200 billion in fiscal year 2026. A significant portion of this income is anticipated to come from the company’s data center business, which contributed 88% of its total revenue in the last quarter and is projected to account for a substantial part of its overall earnings in the current fiscal year. If we assume that the data center business will account for 90% of Nvidia’s total revenue in fiscal year 2026, then the revenue generated from this segment would amount to around $180 billion.

This represents a significant 56% rise compared to the last fiscal year, primarily fueled by the massive interest in Nvidia’s AI graphics processing units (GPUs). These GPUs are being utilized extensively in data centers for training and inference related to artificial intelligence. As per Bank of America’s estimates, Nvidia is anticipated to continue leading the AI chip market with a projected market share ranging from 80% to 85%.

I, as an observer, notice that Bank of America analyst Vivek Arya emphasizes the extensive customer base and control over the supply chain of Nvidia, positioning it as the leading chipmaker in this profitable sector. This assertion is backed by the fact that Nvidia’s data center business continues to exhibit significant potential for expansion.

Intriguingly, according to McKinsey’s forecast, a staggering $5.2 trillion could be invested in AI data centers by 2030, with an additional $1.5 trillion allocated for non-AI workload data centers during the same period. This suggests that Nvidia’s growth prospects in this domain are vast indeed.

The consulting firm additionally highlights that approximately 60% of this projected investment will be allocated to businesses specializing in chip and computing hardware production. This could mean an enormous potential data center chip revenue for Nvidia amounting to $4 trillion over five years, far surpassing the revenue they are expected to earn during the present financial year.

Despite potential losses in the data center chip market to competitors, Nvidia may still experience rapid growth in this sector over the next five years, leading to significant revenue increases. Simultaneously, there’s a steady increase in demand for Nvidia’s enterprise AI software solutions. These tools aid customers in creating AI agents and various applications, as well as managing their AI infrastructure to maintain productivity and security.

In February 2025, Nvidia officials highlighted that their enterprise income nearly doubled yearly on a quarterly basis due to customers implementing its technology to optimize their AI models and create intelligent AI applications, among other uses. The company asserts that their generative AI software platform is instrumental in boosting the precision and decreasing the reaction time of large language models for clients.

It’s likely that the AI market within businesses will bring in approximately $104 billion by 2030. Consequently, it’s reasonable to anticipate that this sector could have a substantial impact on our company’s growth over time.

It might be wise for investors to focus beyond analyst predictions and financial ratios, as Nvidia appears to be on the brink of an impressive growth trajectory, despite its already substantial increases in revenue and earnings over the past few years. The vast potential revenue prospects of Nvidia suggest it could exceed market expectations significantly, potentially driving this AI-related stock towards a staggering $10 trillion valuation within the next five years.

2025-07-18 01:07

Nvidia is trading at a rich valuation once again

Investors would do well to look at the bigger picture

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