Nvidia (NASDAQ:NVDA) stock hasn’t maintained its meteoric rise of the past few months. The stock’s plateaued. And there’s nothing wrong with that. While other artificial intelligence (AI)-exposed peers have been surging, Nvidia stock has started to look cheaper.
So how’s this happened? Well, it’s all about earnings forecasts. Over the past few months — buoyed by Nvidia’s earnings reports and industry developments — analysts have raised their forecasts for the coming years.
The current forecasts suggest that analysts expect Nvidia to grow earnings by 35.6% annually on average over the next three-to-five years. That’s phenomenal, and it’s an improvement on the forecasts a few months ago.
And this is why I’d suggest that Nvidia stock is cheaper today than it was a few months ago.
The price-to-earnings-to-growth (PEG) ratio — calculated by dividing the forward price-to-earnings (P/E) ratio (41) by the medium-term earnings growth rate (35.6%) — is now just 1.15.
That may sound expensive versus the traditional interpretation of the PEG ratio — anything above one was typically not great value. But this figure represents a huge 36% discount to the sector average.
What’s more, this 1.15 figure is also a 31% discount to Nvidia’s five-year average PEG ratio. This, once again, suggests the stock’s much cheaper than it has been.
More than a hardware company
Nvidia should increasingly be viewed not as a cyclical hardware company, but as a vertically integrated AI powerhouse.
Its dominance in chips is well understood. The Blackwell architecture is the benchmark for AI compute. However, the firm’s true strategic moat lies in how it converts this hardware leadership into a flywheel of software, data, and investment-driven growth.
Platforms such as CUDA, Omniverse, and Nvidia AI Enterprise create powerful switching costs, ensuring that developers, enterprises, and even competitors build on its ecosystem rather than outside it.
Beyond software, Nvidia’s quietly built a venture portfolio that could rival specialist AI funds. By funnelling the huge earnings from recent years into equity stakes in high-growth startups like OpenAI, CoreWeave and Wayve, Nvidia’s become a more diversified investment opportunity.
It’s also investing in robotics, with potentiality to be a dominant force as capabilities move from generative, to agentic, and eventually robotic.
These investments reinforce Nvidia’s compute dominance while offering optionality on future technological frontiers such as robotics and autonomous vehicles.
There have also been investments in other sectors, including companies like Recursion Pharmaceuticals. This diversification speaks to those concerned about chip demand normalising or cooling following the current period of rapid AI-infrastructure expansion.
However, investors shouldn’t overlook the risks. There’s a huge amount of money being spent on AI at this moment in time, and there are concerns about its ‘circle of capex spending’, for instance Nvidia investing in OpenAI and OpenAI then buying more Nvidia chips.
Despite this, I think there’s pretty strong evidence that AI spending is here to stay, and Nvidia’s a well-priced stock to ride the wave of AI spending. It’s certainly worth considering.
