NVIDIA Stock at Rare Discount

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•  19 Dec 2025
 

•   NVDA  
   
  +0.03%

Despite NVIDIA dominant position in artificial intelligence chips and explosive revenue growth, the stock is trading at a valuation that looks unusually low by both historical and sector standards. For traders who focus on risk versus reward, this disconnect is difficult to ignore.

NVIDIA currently trades at roughly a 13% discount compared with the Philadelphia Semiconductor Index, tracked by SOXX. Over the past six months, the semiconductor index gained about 35%, while $NVDA advanced closer to 25%. That performance gap has pushed NVIDIA into the lowest percentile of relative valuation over the last decade. In practical terms, there have been only a handful of trading days in ten years when NVIDIA was cheaper versus the sector. For a company that represents about 7% of the SPX and carries a market value near $4.4 trillion, such a discount is rare.

From an absolute valuation perspective, the picture is just as striking. NVIDIA trades at a forward earnings multiple near 25, placing it in the bottom decile of its own historical range. This level of valuation is typically associated with slower-growing technology firms, not a company that has grown revenue at an average annual rate of roughly 60% over the past three years. The main driver of this growth is AI infrastructure, particularly NVIDIA Blackwell accelerators, which have become essential for large-scale AI workloads.

During 2025, NVIDIA controlled approximately 88% of the AI accelerator market, shipping around six million Blackwell units by October. Demand continues to come from hyperscale customers such as Amazon, Google, and Meta, where AI spending is shifting from experimentation to long-term infrastructure buildout. Data center revenue reached $30 billion in the third quarter of 2025, representing year-over-year growth of 112%. These figures matter because they reflect sustained, real demand rather than early-cycle hype.

Bernstein analysts see this valuation gap as an opportunity, setting a price target of $275 compared with a current price near $179, implying potential upside of about 54%. Historically, periods when NVIDIA traded below a 25 forward earnings multiple have delivered strong one-year returns, with no losing outcomes in that data set. The current hesitation in the market stems largely from concerns about the scale of global AI investment, estimated at around $200 billion in 2025, and fears that spending growth could slow. Yet NVIDIA competitive position remains reinforced by its CUDA software ecosystem, which continues to lock customers into its platform.

Beyond hardware, NVIDIA is expanding across the broader AI value chain. In 2025, the company invested $2 billion in Synopsys to accelerate AI-driven chip design. It also launched the Nemotron 3 family of open AI models, ranging from 30 billion to 500 billion parameters, designed for multi-agent systems and complex reasoning tasks. These models are already available on platforms such as AWS and Hugging Face, strengthening NVIDIA role as a full-stack AI infrastructure provider rather than just a chipmaker.

NVIDIA reach also extends into government and industrial applications. Collaboration with the U.S. government on the Genesis initiative supports AI use in energy, scientific research, and national security. Platforms like Apollo are used for climate modeling and large-scale simulations, while AI solutions for factories, robotics, and digital twins continue to expand commercial use cases. At CES 2025, NVIDIA highlighted major safety milestones for its DRIVE AI autonomous vehicle platform. In China, approval to sell the H200 chip could add an estimated 10% to future revenue potential.

There are risks, and the market is clearly pricing them in. Some investors worry about inventory buildup or question whether AI demand is being overstated through circular spending among large technology firms. These concerns help explain the current discount. Still, order visibility remains strong, with demand extending into 2026. The broader SOX index has delivered a total return of roughly 96% over the past three years, driven by AI-related computing needs, and NVIDIA itself is expected to grow revenue by about 45% in 2026 while maintaining gross margins near 75%.

NVIDIA stock is overvalued or undervalued today, the answer may lie in this gap between fundamentals and perception. The current setup reflects skepticism, not weakness in the business. For traders and long-term investors willing to look past short-term noise, NVDA may represent a rare alignment of scale, growth, and valuation that deserves closer analysis.

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