r/valueinvesting
NVIDIA is still extremely dominant, but is the market getting a bit too optimistic?
Author is cautiously bullish on NVDA's medium-term dominance but warns valuation assumes flawless execution amid AI spending risks.
- Data center revenue is growing rapidly, driven by strong AI demand and ecosystem dominance.
- CUDA and Blackwell maintain a significant technological moat against competitors.
- Valuation multiples assume flawless execution and continuous strong results for several years.
- Risk of multiple compression if hyperscalers slow down AI capital expenditures.
After seeing Micron’s results come in better than expected, I went back and took a deeper look at NVIDIA. Honestly, what the company is still pulling off is pretty impressive.
In Q1 FY2027, they reported $81.6 billion in revenue, with $75.2 billion coming from Data Center alone (+92% year-over-year). Data Center now makes up over 90% of their total business. Everything else has basically become secondary.
What I find most impressive isn’t just the chips themselves, but the entire ecosystem around them. CUDA is still very dominant, and with Blackwell ramping up, they’re managing to maintain a real technological lead. Even though AMD is making progress and some hyperscalers are developing their own chips, most large AI models are still running primarily on NVIDIA for now.
That said, I’m starting to have some questions around valuation and how long this dominance can last. The stock is trading at around 30x trailing earnings and roughly 20x forward earnings. It’s not crazy given the growth, but it does assume NVIDIA will keep delivering very strong results for several more years. If AI spending from the big cloud providers slows down earlier than expected, the multiple could compress pretty quickly.
Overall, I’m still positive on NVIDIA for the medium term (I even added to my position on Bitget Stock during the recent pullbacks), especially as long as they maintain their technological and software advantage. Even if the stock keeps dropping, at least I’m collecting dividends. But I do think the scenario where they just keep crushing it for another 3–4 years without any hiccups is a bit too optimistic.
What do you guys think? Do you see NVIDIA as a long-term hold, or are you becoming more cautious on the valuation and competition risks?
The market is absolutely not optimistic that nvda can maintain dominance. Look at their PE
Can we just take a minute and think about how crazy it is that Nvidia is a $4.7T company that wasn't even in the conversation 4 or 5 years ago, and now has a forward PE under 20x and is legitimately looking fairly/undervalued?
The debt here keeps landing on the multiple, but I think that's the wrong thing to argue about. A 20x forward PE only looks cheap if those forward earnings hold, and right now a big chunk of them leans on a handful of hyperscalers' capex budgets. NVIDIA even flags the customer concentration in its own filings. So the risk I'd watch isn't the multiple, it's what happens to the E if one or two of those buyers pull back.
Nvidia is definitely a long-term hold. It won't be a moonshot like the RAM companies but they've built an incredible moat and their products are phenomenal.
I certainly think that the price targets of around $300 are realistic.
One of the things that I appreciate about Nvidia is that they really stick to what they know and are good at. They are very careful about expanding their markets.
They absolutely dominate the GPU, edge computing, and robotics market in terms of both hardware and software. CUDA is the ubiquitous solution for tensor math. Their robotics stack is great and their Jetson SOCs are also amazing.
I always found it a bit frustrating that they only release edge computers in developer kits. If you want to put a Jetson in a nasty environment, you need to count on another company to repackage a jetson SOC into a separate ruggedized product. As an investor, though, I really like to see that they are keeping their focus on R&D and not getting into the weeds.
Rather Nvidia is undervalued or not depends on how you price the industry. I read some analysts report about Nvidia and the way they model it is by coming up with how many GW AI compute will be built by 2030 and calculate a replacement rate then call it the future sustainable revenue of Nvidia. Give it a bull and a bear price multiple and you get the “fare” price range. Long story short, it’s about $200 plus or minus some ten dollars. When Apple sold everyone who could afford it an iPhone, the analysts and investors rightfully expected iPhone revenue growth to stabilize at a replacement level. Because Apple can’t sell you one iPhone this year then two next year and three the year after. AI data centers and AI compute are not like iPhones. If AI tokens are profitable, more compute capacity will be built until they’re no longer profitable. Now, the one thing most people get wrong is they thought when token prices goes down due to competition and technological advancement, AI token factories will be less profitable thus less new AI compute capacity will be built. The opposite is true, lower token cost unlocks new use cases and drive up demand so even more new AI compute capacity is needed. So the pricing model most analysts and investors rely on for Nvidia and other AI companies are just wrong.
Nvidia's numbers are still incredible but any slowdown in hyperscaler AI spending or a faster than expected shift toward custom silicon from the big cloud providers could compress that multiple quickly even if the underlying business remains strong. This seems to be affected micron as well, not in the stocks recent performance but the forward pe is still really low. The markets not trusting some of the spending projections it seems like
nvdia crashed once the crypto craze subsided. from the end of oct 2021 to the end of oct 2022, the stock went from a split adjusted price of $33 to a split adjusted price of $11 - that's a 67% drop. it wiped out 3 years worth of gains. this was after a crazy rise of 65% in just 1 month (from $20 to $33 between the end of september 2021 to the end of october 2021; this should all sound very familiar - i bet mu/sndk/wdc are going to be wiped out in the coming months - perhaps a 50% to 90% wipe out would not be surprising once people come to the realization that the run-up over the last 1.5 years is disconnected from reality (sndk, wdc, and stx are most vulnerable to a 90% drop; mu, skhynix, and samsung will drop \~50%).
i expect nvidia to only drop down to $100 because they actually have something worthwhile to sell in the longer term.
Anyone familiar with [Roko's basilisk] (https://en.wikipedia.org/wiki/Roko%27s_basilisk) knows NVDA is a long-term hold. Better not disappoint our future AI overlord.
Should totally buy MSFT ADBE…. On and on it goes.
A 20x forward PE only looks cheap if the "E" holds up. The biggest risk isn't the multiple, it’s the customer concentration. If just two hyperscalers cut their AI capex budgets, Nvidia earnings will crash
The railroads were dominant too.
Look how how the price has been responding after earnings even when they smash earnings, and then ask yourself what would happen if growthbstaryed to slow down.
🥴 🙏 market is just crazy and headed for a recession the mag 7 and nvdia are seeing it. Paying too much capex to drive.
Good framing. It's also why I'd separate NVIDIA from its customers here. If the market would reward a hyperscaler for spending less, the pressure to pull back only builds over time, and NVIDIA is the one losing revenue when they do.