Just how cheap is Nvidia's stock?

If you haven’t had the pleasure of owning Nvidia (NVDA +3.03%) stock over the past three and a half years, don’t worry, it’s not too late. If you’ve listened to any of the AI hyperscalers’ earnings calls, it’s very clear that the AI data center build-outs aren’t going to stop in 2026 or 2027, and that bodes well for Nvidia, the primary computing unit supplier for these data centers.

However, the market is pricing Nvidia’s stock like it’s not going to grow at all after 2026. That’s a major buying opportunity, and I think missing out on it now could be a generational investing mistake.

Just how cheap is Nvidia’s stock?

The best way to value Nvidia’s stock is to use some form of the price-to-earnings (P/E) ratio. The most common metric to use is the trailing P/E ratio, as it values the company based on what it has already earned. From this perspective, Nvidia may not look as cheap.

NVDA PE Ratio data by YCharts

A 34x trailing earnings multiple isn’t a historically cheap price to pay for a stock. However, this valuation measure leaves out one very important point: growth. With no other context, if presented with two stocks that have the same valuation, investors will always choose the company with higher growth, because the growth rate will make the stock cheaper faster if the stock price stays flat.

As a result, a more commonly used metric to value fast-growing stocks is the forward P/E ratio, which uses analyst estimates for the remainder of the current fiscal year to value the stock. From this vantage point, Nvidia’s stock looks far more attractive.

NVDA PE Ratio (Forward) data by YCharts

At about 25 times forward earnings, Nvidia isn’t valued at that much of a premium over the S&P 500 (^GSPC +0.29%), which trades for 21.3 times forward earnings.

Essentially, the market is telling investors that after this year, Nvidia should trade at a market-average premium. However, that doesn’t make sense, knowing what’s coming in 2027. The AI build-out is likely to remain on pace; Nvidia has already informed investors that it expects $1 trillion in AI hyperscaler capital expenditures next year. For reference, 2026’s projections were about $650 billion to start the year. Wall Street analysts concur with Nvidia’s estimates and project 43% revenue growth next year.

As a result, I think Nvidia is an incredible buy now, as the market isn’t pricing in any 2027 success, like it is with some stocks in the AI realm. This makes it among the best values in this sector, and I think investors would be wise to take advantage of this opportunity and load up on shares.