After a trillion dollars in market value evaporated, Nvidia has become a "value depression," with a price-to-earnings ratio lower than that of the S&P 500.
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After more than $1 trillion in market value evaporated in less than two months, Nvidia’s valuation has now fallen back to levels seen before the AI boom began—this dramatic repricing reflects a profound reassessment of the AI investment cycle by the market.
Nvidia’s current stock price corresponds to a forward 12-month price-to-earnings ratio of about 18, the lowest since early 2019. This figure is not only lower than the S&P 500 Index’s forward PE ratio of over 20, but also far below the Nasdaq 100’s nearly 23 times valuation. Once the hottest stock on Wall Street, Nvidia is now ‘cheaper’ than the broader market.
It’s noteworthy that this round of valuation compression is not due to deterioration in fundamentals.Wall Street analysts continue to raise their earnings forecasts for Nvidia for the coming quarters, and the GPU’s dominant position in the AI data center market remains unshaken. The disconnect between stock price and fundamentals reveals a structural shift in AI trading logic and a broad-based rebalancing of market sentiment from concentrated bets on a single stock to a wider semiconductor sector.
Market Value Evaporation Timeline
After Nvidia’s share price hit a record high on May 14, it plunged, dropping 16% in total and losing more than $1 trillion in market value.
This decline has brought its valuation back to the range seen before the AI boom officially ignited.For reference, Nvidia’s share price rose more than 1,100% from the end of 2022 to the end of 2025, as market expectations for its GPU demand surged unilaterally and its valuation premium continually expanded. Now, with a forward PE ratio of 18, most of the valuation bubble accumulated over the past few years has been digested.
From a relative pricing perspective,Nvidia is now ‘cheaper’ than about half the components in the S&P 500 Index, including The Hershey Company and utility firm Dominion Energy Inc. For a company projected to achieve one of the four fastest revenue growth rates in FY2026, this comparison is rather unusual.
Sentiment Shift and Capital Reallocation
The main driver of this correction is not downward revisions to Nvidia’s performance estimates, but a shift in AI trading logic.
According to Bloomberg, funds are flowing from Nvidia to memory and storage semiconductor stocks, making Micron Technology the biggest beneficiary. Micron’s gain has reached 229% so far in 2026; in 2025 it was up 239%, leading the Philadelphia Semiconductor Index for two consecutive years. Meanwhile, AMD and Intel’s stock prices have doubled or tripled this year.
Eric Clark, CIO at Accuvest Global Advisors, commented: “This stock surged fast and hard for a period—it was an extremely crowded trade. Then the market wanted exposure to other areas, and Nvidia, to some extent, became a source of funds to support other trades.”
Michael Bailey, research director at Fulton Breakefield Broenniman, noted: “Market sentiment has shifted. You can see companies that had previously very low expectations—such as Micron—are now stealing the spotlight.”
Such differentiation is also evidenced in the data. According to Bloomberg, Nvidia’s correlation with the Philadelphia Semiconductor Index last month fell to its lowest since 2014, and its divergence from the overall chip sector deepened significantly.
A Disconnect Between Fundamentals and Stock Price: Stable Market Share and Upward Earnings Forecasts
Despite the pressure on its share price, Nvidia’s fundamental narrative has not shown any substantive cracks.
According to Bloomberg Intelligence data,by the end of 2025, Nvidia’s share of the server GPU market is expected to hit 97%, up from 95% at the end of 2024, with demand for new data centers still strong.
In terms of competition, even as AMD, Intel, and large tech clients such as Google and Amazon accelerate the deployment of their own chips, Nvidia’s market share has so far been virtually unscathed.
On the earnings forecast front, Wall Street analysts remain confident about Nvidia. The company is expected to achieve $228 billion in profits and $393 billion in revenue in fiscal year 2027 ending January 31, 2027, up 90% and 82% year-over-year, respectively. Profit forecasts have been raised by 13% in the past three months.
Among the 82 analysts tracked by Bloomberg covering Nvidia, only 3 have a ‘hold’ rating and 1 recommends ‘sell.’ The average target price set by analysts is $302, implying over 50% upside from the current price—the highest among the “Tech Magnificent Seven.”
Randy Hare, head of equity research at Huntington Bank, said: “Stock price follows earnings. It’s a consistently steady performer.” He expects Nvidia shares to resume their upward movement in the coming months.
The Logic of Repricing: Compression and Historical Reference
For some market participants, the current valuation level deserves a fresh look.
Hare from Huntington Bank believes that considering Nvidia’s sustained revenue growth and profitability, the company already appears undervalued at current levels. Bailey from Fulton Breakefield cites historical precedent, noting that Nvidia has previously seen rapid correction followed by quick recovery in its valuation.
“It’s definitely a tough period, but we’ve seen it before, and we’ve also seen pretty rapid compression followed by pretty rapid bounce-back,” said Bailey. “The bulls just have to hold their breath now.”
However, whether this logic holds depends on whether the market’s outlook on the sustainability of AI capital expenditure changes, and on the timing of funds flowing back from memory, storage, and other subsectors to core computing names. Before that, whether this ‘mean reversion’ in valuation marks the start of value resurgence or merely a midway point in cycle re-rating remains undetermined by the market.
Risk Warning and DisclaimerThe market is risky and investment should be cautious. This article does not constitute individual investment advice and does not take into account individual users’ unique investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their specific circumstances. Investing based on this is at your own risk. ```