Nvidia Stock Won't Be Overvalued by 2028: My Case for Buying NVDA Today

I do not think Nvidia (NASDAQ: NVDA) is wildly overvalued right now, and that's after a day when the stock posted strong earnings and management issued a bullish forecast, sending the stock up 8.7%. I don't think it's overvalued because its current valuation multiple is near multiyear lows, while its earnings and AI dominance are still compounding at rates that make today's price look reasonable. By 2028, if management delivers anything close to management's current guidance, this stock will be a great buy now.

When I look at Nvidia, I start with the basic math. The stock trades around a mid-30s trailing price-to-earnings ratio and a low-20s forward price-to-earnings ratio, levels that are actually below its 10-year average and far under the 50-plus multiples it carried at earlier stages of the AI boom. On top of that, its price-to-earnings-to-growth (PEG) ratio, which compares the valuation to expected growth, sits near 0.5, a signal that the market is not aggressively overpaying for the growth analysts are modeling over the next few years.

In plain English, investors are paying a premium, but it is a smaller one than they used to pay for Nvidia, and it has come down even as the business has exploded.

Image source: Getty Images.

The scale of the current business

This is not a story stock on a few billion dollars of revenue. In its most recent fiscal year, Nvidia generated over $250 billion in total revenue, up roughly 65% year over year, with data center GPUs now responsible for the overwhelming majority of the business. Independent estimates put data center and AI accelerator revenue at $190-plus billion, with that segment representing around 90% of total sales. At the same time, Nvidia still controls roughly three-quarters of global AI accelerator revenue, even after its share has fallen from a peak near 87% as AMD and hyperscaler custom chips start to nibble at the edges.

What the next few years look like

Nvidia's valuation will depend less on today's multiple than on whether it can deliver the growth investors expect through 2028.

Analysts see revenue reaching about $390 billion in 2027 and more than $550 billion in 2028, with annual sales growth of roughly 24% to 25%. Management's outlook is even stronger: about 70% growth in fiscal 2028, which could put revenue near $670 billion.

If Nvidia keeps its gross margin in the low-70% range, much of that added AI revenue could turn into profit and free cash flow. The AI accelerator market is expected to grow from more than $200 billion in 2026 to over $430 billion by 2035. Nvidia may lose some share as competitors gain ground, but its revenue can still rise sharply if overall spending continues to expand. In that case, the stock would not need a higher P/E multiple to support today's price. The bigger risks are execution, whether AI spending holds up, and whether Nvidia can maintain its lead as competition grows.

What could break this thesis?

On top of this competition, if hyperscaler custom silicon gains share faster than expected, or if AI demand normalizes rather than compounding, the earnings path I am describing becomes much flatter, and today's valuation could start to look stretched. Regulatory pressure, export controls, or a major shift toward cheaper inference hardware could also dent margins and challenge the idea that 70% growth is sustainable beyond a year or two.

But given the data I have today, I see Nvidia as richly valued yet not absurdly priced -- and that's even after a strong day like Aug. 27. By 2028, I think the debate will be less about whether it was overvalued in 2026 and more about whether investors gave enough credit to the earnings power of a company that effectively became the default AI compute platform for the world.

Micah Zimmerman 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.