For all of the handwringing about Nvidia Corp.’s sky-high market value pushing the stock into bubble territory, its revenue growth is keeping investors buying.
While the chipmaker’s earnings this week weren’t the blowout Wall Street was hoping to see, they did show that its sales are still climbing faster than most of the technology universe. Nvidia is expected to post revenue growth of at least 42% over the next four quarters, compared with an average of roughly 10% for the tech-heavy Nasdaq 100 Index, according to data compiled by Bloomberg Intelligence.
The stock is actually getting cheaper as analysts raise earnings estimates. Nvidia now trades at less than 33 times projected profits, down from 35 three weeks ago. The Nasdaq 100 is priced at 27 times, and there are 30 companies in the 100-member index with higher valuations than Nvidia, including Starbucks Corp. and Netflix Inc.
“If you went back a few years, people would’ve said that there’s no chance a company this big could grow this fast,” said Bill Stone, chief investment officer at Glenview Trust. “The valuation is certainly not out of bounds, especially relative to hyper-growers.”
To see the other side of this, look at Palantir Technologies Inc., which is up 421% over the past 12 months and is the best performing stock in the Nasdaq 100 and S&P 500 Index in 2025. The maker of data analysis software is projected to deliver revenue growth similar to Nvidia over the next year but is priced around 200 times estimated profits, making it the most expensive stock in the S&P 500.
See also: Forget Nvidia. Costco and Walmart look scarier
If Nvidia, which has a market value of US$4.4 trillion ($5.65 trillion), had the same earnings multiple as Palantir, it would be worth about US$26 trillion. And its stock price would be about 500% higher.
Boom and bust
Even among the small group of megacap technology companies, Nvidia’s valuation doesn’t particularly stand out — even though it’s growing much faster. Microsoft Corp. is priced at 32 times estimated earnings, while Apple Inc. trades at 30 times. Revenue growth at both companies is expected to be a fraction of Nvidia’s in their current fiscal years, at 14% and 6%, respectively.
See also: Defence shares rise, conflicts loom on prospect of US stakes
The history of the semiconductor industry, which is notorious for its boom-to-bust cycles, is helping to keep a lid on Nvidia’s valuation. In the past two decades, the Philadelphia semiconductor index has had two drawdowns of more than 45% amid slumping demand. So it’s reasonable for investors to be concerned that the soaring spending on chips used in artificial intelligence computing, Nvidia’s specialty, will cool at some point.
“The only controversy is when everybody has built every data centre, does it go from explosive growth to nothing,” said Paul Meeks, managing director at Freedom Capital Markets. “That’s the worry.”
But Nvidia’s earnings showed that’s unlikely to happen any time soon. The company’s AI opportunity is “immense,” Chief Executive Officer Jensen Huang said on Wednesday. He estimated spending on AI infrastructure will reach US$3 trillion to US$4 trillion by the end of the decade.
“When you look at the pace of growth or the PEG ratio, that suggests Nvidia is pretty reasonably valued,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “We could see the multiple moving much higher, maybe as high as 60.”
Relatively cheap
A company’s PEG ratio is calculated by dividing its price-to-earnings ratio by its profit growth rate. A lower number implies a better value. Nvidia’s PEG ratio stands at 0.8, the lowest among the Magnificent Seven tech giants and well below its average over the past five years of 1.5, according to data compiled by Bloomberg.
This was not always the case. Nvidia’s price-to-estimated-earnings briefly topped 60 in 2023, which preceded the first in a series of blowout earnings reports fueled by an arms race for its chips. In hindsight, that price turned out to be a bargain. Nvidia shares have gained more than 400% since the company’s valuation peaked at 63 times estimated earnings on May 18, 2023.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
That’s partly because in the more than two years since, Nvidia’s growth has consistently outstripped Wall Street’s projections, according to Richard Clode, portfolio manager at Janus Henderson.
“If you had conviction in your own ‘E’ being a lot higher, then actually the valuation for Nvidia has never been overly challenging,” Clode said. “That remains the case today.”
Looking at the tens of billions of dollars tech giants like Microsoft Corp. and Alphabet Inc. are ploughing into AI infrastructure, there’s no reason to expect that trend to disappear in the near future, according to Glenview Trust’s Stone.
Nvidia “is the absolute market-dominating leader, and that should command a valuation premium, especially with the margins it has,” Stone said. “At the end of the day, there’s still a lot more demand than supply, which is a good place to be.”
