Is Nvidia in an AI Bubble? Here's What Jensen Huang Says.

Nvidia (NASDAQ: NVDA) stock has roared higher over the past several years as artificial intelligence (AI) emerged as a game-changing technology. The company designs the most powerful AI chips around -- they're known as graphics processing units (GPUs) and are key to the development and use of AI. So, the idea is, if you invest in Nvidia, you'll benefit as this technology revolution marches on.

The company has demonstrated this as AI, for the past few years, already has been supercharging its revenue growth. Nvidia has reported double- and triple-digit gains quarter after quarter, and the stock price has taken off too, advancing 1,200% over the past five years.

But, as this has unfolded, valuations of Nvidia and other AI players have climbed too, prompting investors to worry about the potential formation of an AI bubble. And this concern has weighed on the S&P 500 and Nvidia in recent weeks -- they declined more than 2% and 7%, respectively, from the start of November through the Nov. 19 market close.

Are Nvidia and other AI stocks in a bubble? Here's what Nvidia chief Jensen Huang says.

Image source: Getty Images.

The message from other tech giants

Before we zoom in on Huang's comments, though, let's take a quick look at the current AI picture. Though some investors have worried about an AI bubble, we haven't seen evidence of a slowdown in demand for AI products and services. Tech giants from Amazon to Alphabet and Broadcom all have reported earnings over the past several weeks -- and each one has spoken of high demand for AI products and services.

Cloud service providers are building out infrastructure to keep up with this soaring demand -- and this has been driving their revenue growth as well as growth at chip companies such as Nvidia, Broadcom, and Advanced Micro Devices. All of this supports Huang's prediction, delivered a few months ago, for as much as $4 trillion in AI infrastructure spending by the end of the decade.

As mentioned, though, as investors piled into AI stocks, valuations climbed. The S&P 500, as seen through the S&P 500 Shiller CAPE ratio, has been trading at one of its most expensive levels ever. And this has prompted some investors to start thinking about the possibility of an AI bubble taking shape.

Why Huang's view is key

Now, let's consider what Nvidia's Huang has to say about the matter. He, as the leader of a company with great visibility on what's happening next in the AI market, is well-positioned to address this subject. After all, Nvidia is in close contact with its customers as they plan future orders, so the chip giant sees if momentum is slowing or set to continue.

Huang, during Nvidia's earnings call on Wednesday, said the following:

"There's been a lot of talk about an AI bubble. From our vantage point, we see something very different."

The idea is that, though a company such as Nvidia has seen tremendous growth in recent years, we are still in the early days of the AI boom. Huang sees three major shifts in progress: the transition from central processing unit (CPU) computing to GPUs, the broad use of generative AI, and the growing use of agentic AI systems. And these, all requiring AI products and services, should keep powering earnings higher at Nvidia.

"Our singular architecture enables all three transitions," Huang added.

Nvidia's revenue climbs 62%

Nvidia's fiscal 2026 third-quarter earnings reinforce all of this. The company reported a 62% increase in revenue to a record level of $57 billion and maintained high profitability on sales, with gross margin of more than 73%. And the demand picture looks bright too, with Nvidia saying its installed base of GPUs is in use at 100% and "the clouds are sold out."

Considering all of this, Nvidia, trading for around 40x forward earnings estimates, looks reasonably priced.

So, today, in the wake of Nvidia's earnings report, investors may breathe a sigh of relief as Huang offers evidence that the top AI stock isn't in a bubble -- and instead could continue to deliver growth well into the future as the AI boom evolves.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.