Is Nvidia's stock a worthwhile investment?
Nvidia's stock, despite its high P/E ratio and recent strong rally, is still viewed by many analysts as a growth investment rather than a classic bargain. The company's dominant position in AI-related semiconductor demand is driving its impressive growth.
In the first quarter of fiscal year 2026, Nvidia's revenue grew 69% year-over-year to $44.06 billion, with earnings per share (EPS) beating estimates. The company's revenue guidance for the second quarter is around $45 billion, indicating sustained strong growth driven by AI demand and new product rollouts such as the Blackwell AI platform.
Data centers, which are heavily linked to AI compute needs for training and inference, constituted 88% of Nvidia’s revenue as of fiscal 2025 and have been growing at a 108% compound annual growth rate over the past five years. Nvidia leads this market segment, which is expected to expand further given AI adoption trends.
The recent rally has driven the stock price up 66.2% over the past year as of early August 2025, significantly outperforming the S&P 500. This performance factors in investor optimism about AI’s role in semiconductor demand.
Despite the high valuation, the high P/E ratio is a reflection of strong growth expectations rather than undervaluation. Nvidia’s stock does not presently qualify as a bargain on traditional value metrics but is priced for premium growth potential, especially driven by AI-related semiconductor demand, as highlighted by industry leaders including Softbank CEO Masayoshi Son.
Masayoshi Son, the CEO of Softbank, views Nvidia stock as undervalued and believes that creating true artificial superintelligence will require $9 trillion and 200 million high-quality semiconductors in the coming years, which bodes well for Nvidia's prospects.
The BÖRSE ONLINE AI Index, a potential resource for those wanting to benefit from the AI trend with Nvidia & Co., is another indicator of the industry's optimism. The publisher Börsenmedien AG, which holds the rights to an index used in the price of Nvidia's financial instruments, has entered into a cooperation agreement with Nvidia, granting the issuer a license to use the index.
However, it's important to note that Nvidia is not the only company in the high-performance semiconductor sector, and the company could still face competition. The demand for chips for AI expansion is good for Nvidia's prospects, but it also opens up opportunities for other players in the market.
The CEO and majority shareholder of the publisher Börsenmedien AG, Mr. Bernd Förtsch, also holds positions over the financial instruments of Nvidia. This raises questions about whether Nvidia stock could be a bargain that no one has noticed.
Despite these considerations, the stock still offers future upside potential. The current demand for Nvidia's semiconductors is just the beginning of a larger wave, according to Son, and the company's strong financial performance and outlook reflect massive growth fueled by AI expansion, which supports expectations of continued premium valuation.
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- Recognizing the anticipated growth in AI demand and Nvidia's leading position in the semiconductor market, some investors may view Nvidia's stock as an opportunity for premium growth financing, rather than a traditional investing bargain.
- As the demand for high-performance semiconductors ascends with accelerating AI expansion, Nvidia's focus on finance and investing in AI-related technologies presents a potential avenue for prospective returns, given the strong financial performance and optimistic growth outlook of the company.
