Elon Musk Just Made a Surprising Statement About AI Chips. Here's the Stock It Helps.

Elon Musk recently praised Nvidia (NASDAQ: NVDA) GPUs as the best available option for AI processing, while explaining that Space Exploration Technologies (NASDAQ: SPCX) will exclusively use them. Some of those Nvidia processors will head into space next year on its first data center test satellites. That's even better news for Nvidia, and it seems like the good times will continue to roll.

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Nvidia isn't slowing down

Nvidia's market cap is approaching $6 trillion, yet it's putting up growth rates that look more appropriate for a start-up than for the world's largest publicly traded company. The chipmaker more than doubled its revenue year over year in its fiscal 2027 second quarter, and it posted a 62% net profit margin.

Musk's remarks show that the leading chipmaker hasn't lost its edge. Furthermore, the decision to send Nvidia chips up into space next year is a major test. It will determine whether Nvidia's latest processors are ready for the space economy or whether some enhancements will be needed before they can be deployed effectively in orbital conditions.

SpaceX seems more than eager to take that financial responsibility off Nvidia's plate. The company is in the process of raising $40 billion just to buy more Nvidia chips.

SpaceX is far from Nvidia's only customer. Every hyperscaler uses its technology in its data centers, and given how important artificial intelligence is becoming to the global economy, sales are unlikely to slow. Nvidia is already forecasting 70% revenue growth for its fiscal 2028, which starts after the last Sunday of January 2027.

Nvidia still trades at a good valuation

Nvidia has a long history of outperforming the S&P 500 (SNPINDEX: ^GSPC), especially when you zoom in on the AI boom. The GPU maker's stock is up by more than 25% this year, but that return pales in comparison with its fundamental growth. When a company's revenue and net income growth rates exceed its year-to-date stock gains, that can result in compelling valuations.

For instance, Nvidia only trades at a P/E ratio of 28.5, which is lower than the tech industry's average. It's also growing faster than almost every company in the sector. Nvidia also trades at a price/earnings-to-growth (PEG) ratio of 0.48. A stock with a PEG ratio of 1 is considered fairly valued; any positive reading below that suggests that the stock is underpriced.

Of course, Nvidia has to maintain its growth rates to keep its attractive valuation. The fiscal 2028 guidance already points to this, and the fact that companies are eager to borrow billions of dollars just to buy more of its chips shows that demand for them won't slow anytime soon.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.