Nvidia Stock Investors Just Got Good News From SpaceX. Wall Street Says It's Time to Buy.

Nvidia (NASDAQ: NVDA) is the cornerstone of the artificial intelligence infrastructure build-out. The company not only dominates the market for data center accelerators, with nearly 90% market share, but also has booming businesses in networking solutions and central processing units (CPUs).

Nvidia shareholders recently got some good news from Space Exploration Technologies (NASDAQ: SPCX). Here are the important details.

Image source: The Motley Fool.

Nvidia shareholders got good news from SpaceX

In the second quarter, SpaceX reported 247% revenue growth in the artificial intelligence (AI) segment, driven in large part by cloud services deals with Alphabet and Anthropic and, to a lesser extent, enterprise AI tools. SpaceX plans to invest heavily in AI infrastructure in the coming quarters.

CEO Elon Musk told analysts:

We expect to end this year with over 2 gigawatts of compute. And probably our cumulative compute online by the end of next year will be several times higher. It may, let's say, be closer to 10 gigawatts of compute than 5 gigawatts of compute.

Additionally, Elon Musk said SpaceX would only use Nvidia systems in the future. "We've decided to build exclusively on Nvidia because we think the Vera Rubin architecture is the best architecture," he told analysts. "We think it's the best AI computer."

Vera Rubin is Nvidia's next-generation superchip. It features Vera CPUs and Rubin GPUs paired with chip-to-chip interconnects called NVLink. Compared to its predecessor Grace Blackwell, the Vera Rubin module delivers about 10 times more performance per watt, meaning it is far more efficient.

Today, the top five hyperscalers -- Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle -- account for a substantial portion of data center capital expenditures (capex). Collectively, those hyperscalers are forecast to invest about $800 billion in AI infrastructure in 2026, while total AI-related capex is projected to top $1 trillion, according to Goldman Sachs.

In the years ahead, SpaceX may become a sixth major hyperscaler. The company reported $13 billion in AI-related capex in 2025, but it has already surpassed that figure through the first half of 2026. Morgan Stanley estimates SpaceX's investments in AI infrastructure will hit $110 billion in 2028, representing annual growth of about 100%.

Here's the big picture: SpaceX is aggressively expanding its data center footprint. "We're building AI compute capacity at scale faster than anyone else," Musk told analysts on the recent earnings call. The fact that SpaceX has decided not to explore alternatives is a nod to Nvidia's superiority in AI infrastructure. It not only represents additional revenue for Nvidia but may also foreshadow similar decisions from other large companies.

Wall Street says Nvidia stock is deeply undervalued

Wall Street estimates Nvidia's earnings will increase at 45% annually over the next three years. That makes the current valuation of 33 times earnings look downright cheap. Those numbers give Nvidia a price-to-earnings-to-growth (PEG) ratio of 0.75, and values below 1 are usually taken to mean a stock is undervalued.

More importantly, Nvidia's PEG ratio hasn't been this low at any point in the last five years, making the stock a compelling investment. Indeed, among 65 analysts, Nvidia has a median target price of $300 per share. That implies 33% upside from its current share price of $225.

Nvidia stock looks cheap for another reason. Wall Street has consistently underestimated how much money hyperscalers would invest in data center infrastructure. Last year, the consensus estimate said capex spending among the top five hyperscalers would total $525 billion in 2026, but analysts now anticipate almost $800 billion.

If analysts are underestimating how much hyperscalers will spend on AI infrastructure, it stands to reason that they are also underestimating Nvidia's future earnings growth. For that reason, I think investors should consider buying a small position today.

Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.