Nvidia was "wrongly slaughtered"? Valuation falls to a five-year low, market bets on almost zero growth after 2027
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Nvidia’s stock price has increased only 10% this year, with its valuation falling to a near five-year low, while competitors AMD and Micron have surged 142% and 213% respectively. Market pricing seems to suggest that everything that could go wrong will go wrong—but analysts believe this actually creates opportunities for investors who are willing to take a long-term view.
Morningstar analyst Brian Colello points out that Nvidia’s current price of around $212 implies that the company will see almost no further growth after 2027. He believes the stock’s fair value should be closer to $280, roughly 16 times its expected sales for fiscal year 2029. According to S&P Global Market Intelligence, Nvidia's current EBITDA-based P/E ratio is about 17 times next year’s expected earnings, much lower than the five-year average of 36 times, and at its lowest since July 2021.
Meanwhile, hyperscale cloud company capital expenditures have not yet peaked. This week, Alphabet raised its 2026 capex forecast and said it would further increase investment next year, providing continued support for AI chip demand.
Competitors Soar, Nvidia’s Valuation Falls into “Value Stock” Range
Against the backdrop of the Philadelphia Semiconductor Index rising 71% this year, Nvidia’s performance is distinctly lackluster. AMD is trading at 53 times next year’s expected P/E, viewed as a growth stock; Micron has benefited from an explosion in demand for AI data centers, soaring over 200% this year.
Gabelli Funds portfolio manager John Belton says semiconductor investors are chasing stocks where they see “the strongest supply-demand imbalance and unrealized growth opportunities,” and that "Nvidia currently does not meet any of these criteria." Belton has recently been increasing his holdings in AMD and Micron, while taking no action on Nvidia, maintaining his position without adding more.
This valuation divergence is due to the market’s recharacterization of Nvidia—it is being recategorized from a growth stock to a large, mature tech stock.
Bearish Logic: Challengers Emerge, Scale Effects Limit Growth
The challenges facing Nvidia have taken a clear shape. Since OpenAI released ChatGPT, the AI chip market has attracted a large number of new entrants: startups like SambaNova and Cerebras Systems have launched their own chips; Google’s in-house AI chips, developed years ago, are now being sold and rented via cloud services; Amazon is following close behind; Meta, Microsoft, OpenAI, and Anthropic are all pursuing their own chip R&D plans.
AMD will begin shipping its first AI server rack system, Helios, later this year—a highly integrated AI chip and hardware system that directly competes with Nvidia’s Grace Blackwell and Vera Rubin product lines.
Moreover, the revenue base itself creates a growth ceiling. Nvidia's revenue base is already huge—so its growth rate is, by definition, not on the same scale as smaller competitors.
Bullish Counterpoint: Pricing is Too Pessimistic, Growth Outlook Underestimated
There is a clear gap between analyst forecast data and market pricing.
According to analysts, Nvidia’s revenue will grow 42% next fiscal year (ending January 2028), reaching $560 billion; the following year it is expected to grow another 23%. In comparison, although AMD’s revenue is expected to grow 57% in 2027 and 36% in 2028, its absolute size—an estimated $78 billion in 2027—is not in the same league as Nvidia, making it hard to justify AMD’s current premium of 53 times earnings.
Brian Colello notes that Nvidia is “quite cheap looking a few years ahead”; the key question is whether hyperscale cloud providers and enterprises will continue strong capex spending in two years, and whether Nvidia can maintain its market share.
"We believe the answer is yes, and that is why the stock is undervalued." He expects Nvidia’s annual revenue and adjusted EPS growth to exceed 45% through fiscal 2029.
Moat Remains: Market Share in Inference Rises, Countercyclical Resilience Not to Be Overlooked
Despite rising competitive pressure, Nvidia’s dominance in AI chips remains unshaken. According to a recent report from The Information, Nvidia’s market share in inference chips (which run models, as opposed to training them) has actually risen.
More importantly, Nvidia’s countercyclical resilience may be underestimated by the market. Should companies like OpenAI cut back on AI investments, many newcomers who just started their own chip R&D may abandon these efforts and return to Nvidia’s ecosystem—meaning that an AI winter could actually hit Nvidia less than those new, unproven chip design companies.
Additionally, although Nvidia’s strategic investments in new cloud service players like Nebius and CoreWeave have recently been questioned, these moves may buffer its business during market downturns. As hyperscale capex continues to expand, whether Nvidia’s valuation truly reflects its fundamentals is becoming a core market debate.
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