Nvidia Is Still the King: 1 Clear Reason the Rubin Upgrade Cycle Means the Stock Is Not in a Bubble

Since Nvidia (NASDAQ: NVDA) started its monster rise at the beginning of 2023, there have been countless investors who proclaimed the stock to be in a bubble. Time and time again, those investors were proven wrong.

There may be a handful of people who are still saying Nvidia is in a bubble right now, although I'd argue that the opposite is true: I think it's undervalued.

I think investors are underestimating the potential of the Rubin upgrade cycle that's coming later this year, and it could easily send Nvidia stock to new heights that no stock has ever reached before.

Image source: Getty Images.

Even more growth is headed Nvidia's way

Later this year, Nvidia's newest architecture launches. The Rubin chip architectures build upon an already impressive Blackwell architecture, and offer a 10 times reduction in artificial intelligence (AI) inference costs and a four times reduction in training costs. That sounds impressive from a cost-savings standpoint, but what the AI hyperscalers actually hear is that they can achieve a major performance increase at the same cost by running the same number of GPUs.

Regardless of how these units are used, these improvements aren't coming for free. Rubin chips cost about 25% more than Blackwell, which will result in a revenue increase just from switching to a new chip generation. That will help boost Nvidia's revenue and profits over the next year, but there are other factors at play.

All of the major AI hyperscalers announced a combined $650 billion in data center capital expenditures for 2026. While this cohort hasn't unveiled 2027 projections, Nvidia believes the spending will be more than $1 trillion. That's a huge rise, and will likely be leveraged more heavily toward computing equipment as the physical data center buildings near completion.

An upgrade cycle combined with an expanding market could lead to massive growth for Nvidia, and Wall Street analysts back up that projection. For the rest of the current fiscal year (FY) 2027 (ending in January 2027), they estimate 81% revenue growth. For FY 2028, that figure is 41%. While that's not as fast as FY 2027's, it's still a strong growth rate for a company as large as Nvidia. Furthermore, analysts have historically underpredicted Nvidia's growth rate, so don't be surprised if it's much faster than this.

Despite an obviously strong year upcoming, Nvidia's stock has priced in very little future growth beyond this fiscal year.

NVDA PE Ratio (Forward 1y) data by YCharts

That makes Nvidia stock a no-brainer buy now, as it's actually quite cheap and completely dispels the notion that Nvidia is in a bubble.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.