Nvidia Stock Won't Be Overvalued by 2028: My Case for Buying NVDA Today
Key Points
Nvidia's revenue is expected to nearly double in its second quarter, making the stock look like a good value.
Demand from hyperscalers, AI start-ups, and SpaceX should continue to fuel its growth.
Its profits could double from 2026 to 2028.
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Nvidia (NASDAQ: NVDA) has jumped 15% since July 29, but it's not overvalued.
It's true that the stock is more expensive than the S&P 500, trading at a trailing price-to-earnings ratio of 37.5 based on adjusted earnings per share, but investors have to consider the company's growth rate as well. Factoring that in, Nvidia is on fire.
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The company reported 85% revenue growth in the first quarter, and revenue growth is expected to accelerate to 97% in the second quarter as it launches its new Rubin platform.
Image source: Nvidia.
Nvidia's PEG ratio shows it's not overvalued
A price-to-earnings ratio tells you a company's valuation, but it's not that useful on its own. You have to consider a company's growth rate as well, and the metric that does that is the PEG ratio, which is the price-to-earnings-to-growth ratio, or the PE ratio divided by its expected compound annual earnings-per-share growth over a given period, often the next five years.
As of August 2026, Nvidia's PEG ratio was just 0.62. A PEG ratio under 1 is typically considered undervalued, as it indicates that earnings will grow to generate a good return on investment.
The PEG ratio comes with a caveat, which is that future earnings are difficult to predict, especially five years out, but there's clearly a lot of momentum behind Nvidia's growth.
Not only is revenue expected to nearly double in fiscal Q2 2027, the current quarter, but the market for Nvidia's data center chips, which make up the bulk of its business, seems to keep expanding.
SpaceX (NASDAQ: SPCX), flush with cash after its recent IPO, said it would build its AI infrastructure exclusively on Nvidia chips. For Nvidia, that means it's earned a great customer in SpaceX, and it's a strong signal to the market that Nvidia makes the best chips. SpaceX is targeting 10GW of compute by the end of 2027, meaning it will spend an estimated $150 billion-$250 billion chips. That appears to set up a massive windfall for Nvidia.
Nvidia CEO Jensen Huang has given $1 trillion in total revenue as a target for 2026-2027, implying the company could hit roughly $400 billion in revenue this year and $600 billion in fiscal 2028, which ends in Jan. 2028.
Hyperscaler capex will support Nvidia's profit growth
In addition to the tailwind from SpaceX, Nvidia will also benefit from soaring capex spend among the four big hyperscalers, Amazon, Alphabet, Microsoft, and Meta Platforms, who are expected to spend roughly $700 billion on AI chips this year, and that number is likely to go up next year, fueling strong profit growth into 2028.
Additionally, Anthropic and OpenAI are expected to IPO soon, and that could happen before the end of 2026, though OpenAI now appears to be leaning toward going public in 2027. Those companies will be flush with cash after their public offerings, like SpaceX is now, and are likely to accelerate spending on AI infrastructure, including Nvidia chips.
Why Nvidia's a buy today
Nvidia dominates the market for data center GPUs with its market share hovering around 90% share, and it has significant growth potential in the physical AI market if robotics and autonomous vehicles go mainstream.
Meanwhile, the company looks perfectly positioned to benefit from the surge in AI infrastructure coming from the hyperscalers, SpaceX, and AI start-ups Anthropic and OpenAI.
At its trailing price-to-earnings ratio of 37.5, the stock actually looks undervalued when looking out over the next few years, as earnings per share could double from fiscal 2027 to fiscal 2029 (calendar 2028).
Nvidia's valuation is lower than its growth would suggest because investors seem to be afraid of the cyclicality of semiconductors, but I think that's a mistake.
Nvidia chips that are several years old are still in use, and there are signs that the AI build-out is only in its early stages. Given that, Nvidia's profits could go a lot higher from here, and that will push the stock higher, even if skepticism remains.
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Jeremy Bowman has positions in Amazon, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
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