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The Nvidia (NASDAQ: NVDA) stock price has been going through a tough patch. Even before the latest tariff wars, the company faced restrictions on exporting artificial intelligence (AI) chips. And if Chinese developers can do the job with lower-power processors cheaply, that could hurt.
But let’s put recent moves into some perspective. You see, £10,000 invested in Nvidia stock five years ago would now be worth somewhere around £145,000. Wow!
But that’s all history, yes? And things aren’t going so strongly now, right? Well, in the past 12 months we’ve still seen a 32% gain. Even after the damage caused by recent politics, that’s still the kind of annual investing return I’d love to be able to hit with anything close to regularity.
Cheap?
We often look back at high-flying tech stocks, thinking we’ve missed the boat. Yet still we wait, hoping for something to send them back down to give us a cheap buying opportunity.
And on current valuation measures, Nvidia looks cheaper than it’s been for a long time. Yes, even with its market cap down around $2.6trn. Down is relative, and that’s still close to the entire valuation of all the stocks in the FTSE 100 put together. But Nvidia had been valued at more than $3.5trn at its peak.
Cheap is relative too, of course, so what am I talking about?
For the year ended January 2025, Nvidia posted a 114% jump in revenue to a record $131bn. Earnings per share (EPS) soared 147%. And it even accelerated in the final quarter, with Q4 revenue up 126% and EPS up a stunning 586%.
The future
If this was supposed to be anywhere near peak earnings, it seems nobody’s told the analysts yet. They forecast a 28% EPS rise in the 2025-26 year, followed by a further 18% the next year.
That might be slowing after the bumper year we’ve just seen. But if these forecasts are close to accuracy, we could see the price-to-earnings (P/E) ratio down around 16 by the year ending January 2028.
This is the world’s leading designer of the technology used in the most exciting growth industry we’ve seen since the internet itself. And it’s valued at only around the UK’s FTSE 100 average. It’s valued lower on that basis than our very own Unilever with its leading-edge, erm, soaps and mayonnaise and things.
Danger
Nothing this exciting comes without risk. And right now, the US government looks like it’s doing all it can to stymie Nvidia’s global growth and hand China the incentive to fast-track its own chip development.
Competition is a fear. And more than a few observers think the massive current AI spend is too much, too soon. Is there a huge new opportunity beyond large language models and fancier ‘agentic’ AI customer service offerings? We don’t know yet. But that’s technology for you. We can never really know.
For any investors who were waiting hopefully for a new buying opportunity, this surely has to be a great time to consider capitalising on the recent Nvidia stock falls.
