Image source: Getty Images
Nvidia (NASDAQ: NVDA) stock is synonymous with the artificial intelligence (AI) revolution. The company’s technology is powering everything from hyperscale data centres to self-driving cars.
However, even after a meteoric rise and a $3.46trn market cap, I don’t believe this stock is overvalued. In fact, I’m confident that it’s not.
So, why is that? Well the answer lies in the metrics, like Nvidia’s price-to-earnings-to-growth (PEG) ratio, and its unparalleled intellectual property (IP) portfolio.
Valuation is king
Let’s start with valuation. At first glance, Nvidia’s headline multiples may look a little daunting for UK investors. Its current forward price-to-earnings (P/E) ratio sits at 33.2 times. That’s about 49% above the sector median of 22.3.
The trailing 12-month P/E is equally lofty at 44.5 times. That’s more than double the sector’s 21.67. On metrics like price-to-sales and price-to-book, Nvidia trades at an even steeper premium, reflecting the market’s confidence in its growth story.
But these numbers only tell part of the story. The real insight comes from the PEG ratio, which adjusts for the company’s explosive earnings growth. Nvidia’s forward PEG stands at just 1.15, a full 34% below the sector average of 1.75 and well under its own five-year average of 1.79.
Historically, a PEG ratio under one was considered a sign of good value, but that doesn’t apply so much these days, especially in tech. Instead, it may make more sense to compare companies within a sector.
As the PEG suggests, Nvidia’s earnings per share are forecast to climb rapidly in the coming years. Analysts expect $4.35 for the year ending January 2026, $5.58 for 2027, and continuing upwards.
That translates to a forward P/E of 33.15 for 2026, falling to 24.77 in 2027 and 21.6 by 2028, before stabilising around 22.29 in 2029.
There’s more to Nvidia than just chips
Where does this growth come from? Nvidia’s dominance in AI and data centres is well documented, but its vast IP portfolio — spanning GPUs, software, and AI frameworks — creates a powerful ecosystem effect.
This ecosystem is now extending into robotics, where Nvidia’s platforms like Jetson and Isaac provide the hardware and software backbone for next-generation autonomous machines.
And as AI moves from the cloud to the physical world, robotics could be Nvidia’s next multi-billion-dollar opportunity. But I also wouldn’t be surprised to see Nvidia lead in areas like quantum computing too.
Yes, there are still risks. Many will be concerned that peers could catch with Nvidia’s chipsets or that US trade restrictions will slow the company’s growth. What’s more, I accept that ventures in robotics and quantum computing come with execution risks.
However, financially, Nvidia is in a league of its own. With $53.7bn in cash and just $10.3bn in debt, it enjoys a net cash position that dwarfs its chip-making peers. This gives Nvidia the flexibility to invest aggressively in research and development, pursue strategic acquisitions, and weather any cyclical downturns.
I recently bought more Nvidia stock, and I may continue to top up. It’s certainly a stock I think investors should consider even as the share price pushes higher. Nvidia’s best days may still be ahead.
