History Says Nvidia's 2026 Run Is Just Getting Started

Nvidia (NASDAQ: NVDA) is in some ways a seemingly predictable stock. Every year, the market assumes that this will be the year that the company's revenue growth will slow down and the stock will come back down to Earth. As a result, the stock looks a bit undervalued at the start of the year and delivers ho-hum returns. But then, artificial intelligence investing fever tends to make an appearance around the start of the Q1 earnings season, and Nvidia's stock booms as a result.

Last year, it rose 20% in May. In 2024, it rose 32% in May. This year, it had a strong April, rising by around 20%. However, if history is any guide, Nvidia stock could continue its run well into May.

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Nvidia's stock is still trending below its historical valuation norms

When assessing Nvidia's stock, I think it's best to use the forward price-to-earnings ratio. The reason for that is simple: Nvidia's expected top- and bottom-line numbers in the years ahead are very different from those it has delivered in its recent past. While you can argue for measuring a company based on its trailing earnings when that company isn't growing incredibly fast (say between 10% and 20% year over year), Nvidia's fourth-quarter growth rate was 73% year over year. Management also guided for 77% growth in Q1.

With that sort of rapid growth, the trailing earnings metric isn't a great reflection of the company's value.

In 2024, Nvidia's forward P/E ratio reached 37.

NVDA PE Ratio (Forward) data by YCharts.

However, Nvidia's revenue growth during that time was over 250%. So, I don't think Nvidia will return to trading at that level.

In 2025, Nvidia's forward P/E climbed to 29 at the end of May.

NVDA PE Ratio (Forward) data by YCharts.

Its revenue growth during that time frame was 69%, but its growth was also decelerating then. Today, it's accelerating. So, I think it would be natural for the market to give Nvidia a bit of a premium beyond that level.

If we assume that Nvidia's valuation could rise to 32 times forward earnings by the end of May, that would amount to a nearly 30% upside, as it trades for about 25 times forward earnings now. However, that's not the end, either.

NVDA PE Ratio (Forward) data by YCharts.

Nvidia's valuation has commonly reached 40 times forward earnings as the end of a year approaches. The only way it will regain that level is if 2027's forecast revenue growth is outstanding, and it's hard to tell from this point what it will look like. If AI hyperscalers continue to spend as they have been (and it looks as if those capital investments are paying off), then Nvidia could have another strong year of growth ahead. This makes Nvidia a top stock to buy now and hold over the next few years, as the AI build-out is still boosting its business.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.