Nvidia’s valuation hits a seven-year low: Is the market systematically undervaluing the biggest winner in AI?

Nvidia, Microsoft, Amazon—these tech giants, seen as the most direct beneficiaries of the AI wave, are seeing their stock valuations collectively fall to multi-year lows. A rare phenomenon of inverted valuations is spreading across the market: the price-to-earnings ratio of the AI chip leader is lower than Apple's, whose growth rate is less than one-sixth of Nvidia’s. According to The Information, as of the close this Monday, Nvidia's stock price was $165.17, with a forward price-to-earnings ratio of just 19.9x, the lowest level in seven years. Meanwhile, Apple’s forward price-to-earnings ratio is as high as 28.7x—while Nvidia’s revenue is expected to grow 71% this fiscal year, Apple’s is only about 12%. The collective market repricing is partly attributed to recent geopolitical shocks that triggered broad sell-offs. However, analysts point out that the overall market decline is not sufficient to explain the magnitude of valuation compression in these high-growth tech stocks. For institutions focused on AI-themed investments, the current valuation structure may indicate systematic mispricing or suggest that the market's patience for the AI growth narrative is quietly fading. Nvidia: The Biggest Beneficiary of AI, Yet Trades at “Ordinary Stock” Valuations Nvidia’s current valuation has never been this low in nearly seven years. According to The Information quoting Koyfin data, the stock’s forward price-to-earnings ratio has dropped to 19.9x, lower than Apple’s 28.7x, despite a vast difference in growth potential. Based on S&P Global Market Intelligence data, Nvidia’s fiscal year revenue to January next year is expected to grow 71%, whereas Apple’s fiscal year revenue to September this year is expected to grow only about 12%. From the perspective of the AI industry chain’s ability to monetize, Nvidia is so far the most direct and significant beneficiary; in contrast, Apple has gained little from the AI craze, with no clear contribution to its performance yet. However, the market’s pricing logic seems not to reflect this reality. Investors give Apple a higher valuation premium, while treating Nvidia almost as a traditional manufacturing company, creating one of the most striking valuation paradoxes within the tech sector today. Microsoft and Oracle: The Decade-Long Valuation Gap Narrows Sharply What’s also notable is the dramatic narrowing of the valuation gap between Microsoft and Oracle. Two years ago, Microsoft’s forward price-to-earnings ratio was 34x, Oracle’s was 20x; but now, after a roughly 26% drop this year, Microsoft’s ratio fell to 20.4x, while Oracle’s is 18.5x—the two valuations approaching parity for the first time in nearly a decade. The fundamental logic behind this repricing is the divergence in growth expectations. Analysts expect Microsoft’s annual revenue growth over the coming years to remain around 16%, lacking clear acceleration. In comparison, Oracle’s revenue growth is expected to leap from 8.4% in fiscal 2025 to 46.5% in fiscal 2028. However, this comparison has important limitations. Oracle is much smaller than Microsoft and is heavily borrowing to fund expansion, with high financial leverage and unignorable risk premiums. The Information refers to these structural differences as the “AI opportunity”. Amazon: Lowest Valuation Since Financial Crisis, First-Time Discount to Walmart The valuation anomaly is not limited to Nvidia. According to Koyfin data, Amazon’s current price-to-earnings multiple is at its lowest level since the 2008 financial crisis; more unusually, Amazon is trading at a discount to Walmart for the first time ever. This phenomenon is also hard to justify at a fundamental level. Amazon's annual revenue growth is above 12%, while Walmart's is about 5%; the former’s strategic position in cloud computing and AI infrastructure is far superior to the latter. This cross-sectoral valuation inversion reflects the current structural chaos in tech stock pricing. The Information’s commentary suggests that if this is a “selective AI caution syndrome,” its spread goes well beyond chip stocks, having extended to cloud computing and e-commerce platforms, and may pose potential pressure on the future IPO pricing of AI unicorns like OpenAI and Anthropic. Risk Warning and Disclaimer The market involves risks, and investment must be cautious. This article does not constitute personal investment advice, nor does it take into account individual users’ unique investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their specific situation. Invest accordingly, and you assume responsibility for your own actions.