Could Nvidia Be the Cheapest Way to Own the AI Boom Right Now? Here's What You Need to Know Before Earnings

Nvidia (NASDAQ: NVDA) has become the most dominant and profitable company in AI infrastructure, and it's not even close. It's also been one of the worst-performing chip stocks so far in 2026, despite posting incredible business results. While the PHLX Semiconductor Index has gained more than 60% so far this year, Nvidia is up by roughly 12% year-to-date as of this writing.

That's a big performance gap. Let's take a step back to look at why Nvidia has been such an underperformer in 2026, the important valuation metrics to know, and whether Nvidia is a cheap stock -- or cheap for a reason.

Image source: Getty Images.

What's with the underperformance?

As mentioned, Nvidia has dramatically lagged the overall semiconductor industry so far in 2026 in terms of stock performance.

There are a few basic reasons. First, the numbers have simply become very large, and the market seems to be pricing in an eventual slowdown. Nvidia's trailing 12-month revenue is more than $250 billion, and is nearly double what it was a year ago. At the current growth rate, this would reach about $500 billion a year from now and $1 trillion a year after that. The market doesn't seem convinced the current pace of growth can last much longer.

Second, the market is no longer surprised by Nvidia's results. It has beaten expectations quarter after quarter in recent history. Nvidia's two previous earnings reports this year were spectacular, but the market didn't really care.

Finally, Nvidia's competitive threats are intensifying. Not only from AMD (NASDAQ: AMD), which is emerging as a serious contender in the AI data center chip space, but from custom accelerators developed by the hyperscalers themselves.

A $5 trillion cheap stock?

On the surface, Nvidia looks cheap, at least compared to other AI stocks. It trades for about 25 times forward earnings, and this is for a business with a 74% gross margin and an 85% year-over-year revenue growth rate in the most recent quarter. Plus, the company has reported an order book worth about $1 trillion across 2026 and 2027.

Nvidia reports its fiscal third-quarter earnings later this week, and there are a few things to watch in addition to the headline revenue and earnings growth numbers. Any management commentary on hyperscaler order flow is worth noting, and it's important to keep a close eye on Nvidia's gross margins, especially with so much new competition in the market.

The bottom line is that Nvidia is an attractively valued AI stock right now, especially given its growth trajectory. But there are serious questions about how long the current growth momentum can be sustained, and whether competitive pressures will start to affect Nvidia's pricing power going forward.

Matt Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.