NVIDIA's Valuation Drops to Five-Year Low, Forward P/E Halved

NVIDIA's stock price has only risen 10% this year, making it the worst-performing heavyweight stock in the sector against the backdrop of a 71% surge in the Philadelphia Semiconductor Index. The current stock price is around $212, with the market implying that it will see almost no growth after 2027, with a fair value close to $280, approximately 16 times the expected sales for fiscal year 2029. NVIDIA's current EBITDA-based forward P/E ratio is about 17 times, significantly lower than the five-year average of 36 times, and at its lowest range since July 2021. Competitor AMD has a forward P/E ratio of 53 times, with a year-to-date increase of 142%. Investors are chasing targets with supply-demand imbalances and untapped growth opportunities, and NVIDIA currently does not meet these criteria. Bears believe that NVIDIA faces numerous challengers and a scale ceiling, with startups like SambaNova and Cerebras launching self-developed chips, while Google, Amazon, Meta, Microsoft, OpenAI, and Anthropic are also advancing their own development plans. Bulls, on the other hand, expect NVIDIA's revenue to grow by 42% to $560 billion in the next fiscal year, far exceeding AMD's projected $78 billion for 2027, arguing that the market has overestimated the pricing of competitive threats.

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