Nvidia's forward price-to-earnings (P/E) ratio for the next 12 months has fallen below 17 times, marking its lowest level in over a decade. This valuation is half of what it was in 2025 and significantly lower than the 25 times recorded in May of this year.
Despite the valuation drop, Nvidia's financial outlook remains strong. Revenue and net profit for fiscal year 2027, ending in January, are projected to jump 90% and 99% respectively. For fiscal year 2028, the company expects sales growth of 70%, up from a previous forecast of 45%.
Market sentiment remains cautious regarding the sustainability of Nvidia's profit growth. Eli Horton, portfolio manager at TCW, noted that market expectations for the company are currently lower than the general consensus, reflecting skepticism about long-term profitability.
Nvidia's stock rose 22% in 2026, ranking second among the 'Magnificent Seven' tech companies. However, this lags behind the broader semiconductor index, which has gained nearly 76% this year, driven by Micron, Intel, and AMD, all of which saw gains exceeding 180%.
CEO Jensen Huang has publicly addressed the disconnect between the company's fundamentals and its stock valuation. At a recent Goldman Sachs technology conference, he described Nvidia as the world's first and only 'growth value stock' and stated that the firm is misunderstood.
