Nvidia Is a $5 Trillion Company -- and It's Still Undervalued
Key Points
Nvidia's growth rate is far greater than most other big techs.
Investors recently received great news about 2027.
- 10 stocks we like better than Nvidia ›
There's currently only one company valued at $5 trillion: Nvidia (NASDAQ: NVDA). While that's a huge market cap, I actually think Nvidia is undervalued.
It may seem counterintuitive to say the world's largest company is undervalued, but after digging in a bit, I think you'll see what I mean.
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Impressive growth despite its size
Nvidia has risen to the top thanks to insatiable demand for its graphics processing units (GPUs). It's the undisputed leader in this realm, and its products are the industry standard for AI training and inference. With the AI hyperscalers spending hundreds of billions of dollars on capital expenditures (capex) this year, it shouldn't surprise anyone that the chipmaker's growth continues to be impressive.
In the first quarter, revenue rose 85% year over year to $81.6 billion. That rate is more than the next four largest companies combined. Wall Street analysts project Nvidia to continue this acceleration trend through next quarter, with the average analyst guiding for 96% growth to $91.7 billion.
Those are absurd numbers, yet despite their impressive nature, the company still doesn't draw the same respect as its big tech peers. From the perspective of forward earnings valuation, it has the lowest valuation of the five largest companies in the world.
AAPL PE Ratio (Forward) data by YCharts.
That makes Nvidia actually look cheap compared to its peers. There is growing concern about what its future looks like, but 2027 will likely be somewhat of a repeat of 2026.
In its conference call, Nvidia's management said it expects data center capex to reach $1 trillion next year from AI hyperscalers. The company likely has some insider information here, as it receives orders for GPUs well in advance so that it can fulfill them when it's time to ship. So, next year should be strong as well.
When you use the forward price-to-earnings ratio (P/E) with projected 2027 earnings, Nvidia's bargain price tag becomes more apparent.
AAPL PE Ratio (Forward 1y) data by YCharts.
If Nvidia can rise to the same level as its peers, then the stock has at least 50% upside. That would be a solid return in a short time frame, and it showcases just how good a deal investors can get on the stock right now. Just because you missed the initial run-up doesn't mean you have to miss the rest of its rise. Nvidia's stock looks like a solid value right now, and it's time to act.
Should you buy stock in Nvidia right now?
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Keithen Drury has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
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