NVIDIA's valuation falls back to before AI boom, Wall Street's bullish enthusiasm remains undiminished

NVIDIA's valuation falls back to before AI boom, Wall Street's bullish enthusiasm remains undiminished.

After losing about $1 trillion in market value in less than two months, Nvidia's stock valuation (the expected price-to-earnings ratio for the next 12 months) has fallen to its lowest level since the artificial intelligence (AI) boom began.

Although Nvidia's GPUs still dominate the AI data center market, its stock price has fallen 16% since hitting a record high on May 14. Investors are re-adjusting their AI investment layout, with funds flowing from NVIDIA to other semiconductor manufacturers, especially in the field of memory chips.

The sell-off has left the stock, once Wall Street's most coveted, trading at just 18 times expected earnings for the next 12 months, the lowest since early 2019, according to data compiled.

More reflective of the decline in valuation, Nvidia's forward price-to-earnings ratio is now even lower than the S&P 500's more than 20 times and the Nasdaq 100's nearly 23 times. It is worth noting that Nvidia's valuation has shrunk not because of deterioration in fundamentals.

On the contrary, Wall Street analysts have continued to raise their profit forecasts for the company in the coming quarters in recent months. This stock price correction more reflects that the AI investment boom is spreading to other areas, such as memory chip manufacturers including Micron Technology.

Meanwhile, shares of rivals AMD and Intel have doubled or even tripled this year. "Market sentiment has turned," said Michael Bailey, director of research at Fulton Breakefield Broenniman.

"Companies that previously had very low expectations, such as Micron, are now in the spotlight." Nvidia is still expected to record the fourth-fastest revenue growth among S&P 500 companies, but its valuation is lower than about half of the companies in the index, even lower than candy maker Hershey and utility company Dominion Energy, data show.

Randy Hare, director of equity research at Huntington Bank, believes that Nvidia is currently undervalued, considering its continued stable revenue growth and profitability. "The stock price will eventually follow earnings performance. Nvidia has always been a stable growth company." He expects the stock price to resume rising in the next few months.

Driven by the surge in GPU demand, Nvidia's stock price has soared by more than 1,100% from the end of 2022 to 2025, but the increase has slowed down significantly this year. Shares are up just 5.6% so far in 2026, significantly lagging the S&P 500's 9.6% gain and the Nasdaq 100's 16% gain.

By comparison, the Philadelphia Semiconductor Index has risen 74% this year and is on track for its best annual performance since 2003. Among them, Micron has benefited from the surge in high-bandwidth memory (HBM) chip prices, which have risen by 229% this year, leading the index again after rising by 239% in 2025.

However, Nvidia became the third worst-performing stock among the 30 constituent stocks of the Philadelphia Semiconductor Index. It was the second-best performing stock in 2024 and was in the middle of the pack last year.

Data shows that the correlation between Nvidia's stock price and the index fell to its lowest level since 2014 last month, highlighting the increasing disconnect between market trends. Eric Clark, chief investment officer of Accuvest Global Advisors, said: "Nvidia had risen too fast and too fiercely, and it once became an extremely crowded trade.

Then the market began to look for new investment directions, so investors sold Nvidia to free up funds for other transactions." Currently, competition from AMD, Intel, and self-developed AI chips from large customers including Google and Amazon is still an important factor suppressing Nvidia's stock price.

However, Nvidia's market share has been almost unaffected, as demand for GPUs in new AI data centers remains strong. Data shows that as of the end of 2025, NVIDIA occupies 97% of the server GPU market, which is even higher than the 95% share at the end of 2024.

This is also an important reason why Wall Street is still highly optimistic about its earnings growth. Of the 82 analysts covering Nvidia, only 3 have a "hold" rating and only 1 recommends a "sell." The average analyst price target is $302, which means there is still more than 50% room for upside in the next 12 months, the highest among the Big Seven.

Fulton's Bailey believes that Nvidia has successfully emerged from valuation compression cycles many times in the past, which is an important reason why investors should still maintain confidence. "It's been a tough time for sure, but it's happened before, and we've seen valuations shrink quickly and then recover quickly.

The bulls just have to be patient now." (

#Stocks #Nvidia #Amazon #Google #AMD