Nvidia, once the darling of Wall Street’s AI boom, has seen its valuation plummet to become the second-cheapest among the “Magnificent Seven” tech stocks based on future growth metrics. The chipmaker’s shares have dropped more than 30% from their early 2025 high, opening a potential buying opportunity for investors willing to look past current trade tensions with China.
Despite trading at 35.5 times trailing earnings—the second-highest in the Magnificent Seven, trailing only Tesla’s 118.4—Nvidia’s forward-looking valuation tells a more compelling story. Looking ahead to the next year, the company trades at approximately 23.3 times forward earnings, with only Google parent Alphabet and Facebook parent Meta Platforms sporting lower multiples, according to The Motley Fool.
Growth Metrics Paint a Different Picture
The most striking valuation measure comes from the price-to-earnings-to-growth (PEG) ratio, which factors in analysts’ earnings projections over the next five years. Nvidia’s PEG ratio stands at just 1.02, neck-and-neck with Meta Platforms (1.01) for the lowest among the Magnificent Seven giants.
This compressed valuation seems at odds with Nvidia’s dominant market position. The company controls more than 80% of the AI training chip market and is projected to grow revenue by 57% this year, compared to just 4.7% for the S&P 500 overall. This disconnect between growth prospects and current pricing has caught the attention of contrarian investors.
Multiple Headwinds Create Perfect Storm
Several factors have contributed to Nvidia’s steep decline. In January, Chinese AI company DeepSeek introduced a powerful large language model developed at a fraction of the cost of U.S. alternatives, raising concerns about future demand for Nvidia’s premium-priced GPUs. President Trump’s aggressive tariff policies have also hammered tech stocks broadly.
Most recently, new U.S. export restrictions on Nvidia’s H20 AI chips to China resulted in the company taking a $5.5 billion hit. The White House’s tightened restrictions specifically target a product originally designed to comply with earlier export rules, representing a significant strategic shift in U.S. policy, according to Yahoo Finance.
Wall Street Remains Divided
Not everyone sees Nvidia’s current valuation as attractive. NYU finance professor Aswath Damodaran, known as the “Dean of Valuation,” believes the stock remains overvalued by approximately 23%. Wall Street’s five-year earnings growth projections could prove overly optimistic, and uncertainty around trade tensions and recession fears continue to cloud the outlook.
The analyst consensus for Nvidia’s full-year earnings has dropped 1.5% over the past month, while the revenue forecast is down 1.2%. Additionally, key customers like Microsoft have announced plans to pull back on data center projects, raising questions about the sustainability of AI-related spending.
“If you want to buy here, you’re probably betting on hyperscaler demand for AI,” said Krishna Chintalapalli, portfolio manager at Parnassus Investments. While the intent to spend on AI remains, “they can always slow down on the margins” and “you can’t make a call on the pace of investment, given the macro and tariff issues,” according to Quartz.
Long-Term Bulls See Opportunity
Despite the pessimism, the majority of Wall Street remains bullish on Nvidia’s prospects. Nearly 90% of firms tracked by Bloomberg recommend buying the stock, with shares trading more than 60% below the average analyst price target—one of the widest gaps in recent years.
“Politics will remain part of the investment landscape for the foreseeable future, and the landscape will continue to evolve,” said Daniel Flax, senior research analyst at Neuberger Berman. “This will impact many companies, including Nvidia, but I think it will continue to execute and innovate, and that will continue to drive growth. I think shares look pretty attractive if you have a 12- or 18-month time horizon.”
Shana Sissel agrees that the current valuation represents a good entry point, especially ahead of the company’s late May earnings report, which she expects will show signs of Chinese customers front-loading purchases in anticipation of tariffs. “I think it’s attractive,” she said. “I’m obviously a bull on it. I’ve always liked Nvidia stock.”
For long-term investors, the question remains whether Nvidia’s current valuation discount properly reflects its geopolitical challenges or represents a rare opportunity to purchase shares in the AI revolution’s most crucial hardware provider at a substantial discount.
