NVIDIA Misjudged by the Market? Valuation Drops to Five-Year Low, Forward P/E Ratio Halved, Competitive Threat Overpriced

BlockBeats News, July 25th, according to BIT (bit.com) market data, NVIDIA's stock price has only risen by 10% this year, becoming the most disappointing heavyweight stock in the sector against the backdrop of a 71% surge in the Philadelphia Semiconductor Index. Morningstar analyst Brian Colello pointed out that the current price of around $212 implies that NVIDIA will have virtually no growth after 2027, and the company's fair value is actually close to $280, equivalent to 16 times the expected sales for the fiscal year 2029.

NVIDIA's current EBITDA-based forward P/E ratio is around 17 times, far below 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%. John Belton, a fund manager at Gabelli Funds, said that investors are chasing targets with the strongest supply-demand imbalances and unrealized growth opportunities, none of which NVIDIA currently meets.

The bearish thesis on NVIDIA is based on the emergence of challengers and a scale ceiling: startups like SambaNova and Cerebras are launching self-developed chips, while Google, Amazon, Meta, Microsoft, OpenAI, and Anthropic are all advancing self-developed plans. AMD's first AI server rack system, Helios, will ship later this year, directly targeting the Grace Blackwell and Vera Rubin series.

The bullish view on NVIDIA argues that the company is expected to see its revenue grow by 42% to $560 billion in the next fiscal year and another 23% the following year, significantly higher than AMD's projected $78 billion in 2027, making the more than twofold valuation premium difficult to explain based on growth rate differentials. More importantly, NVIDIA's market share in the inference chip market has actually increased; its countercyclical resilience is also underestimated—once AI investment cools down, many companies that have just entered the self-developed chip space may abandon their efforts and return to the NVIDIA ecosystem, making the impact of an AI winter on NVIDIA potentially less severe than on emerging chip design firms. Colello expects NVIDIA's revenue and adjusted EPS growth to exceed 45% per year before the fiscal year 2029, believing that the market has already overly priced in the competitive threats.