Think Nvidia Stock Is Expensive? This Chart Might Change Your Mind

Nvidia has made headlines this year, boasting a remarkable increase of over 180% to date and an astounding 2,650% rise over the past five years. With these impressive gains, many investors may wonder if Nvidia stock is still a good buy or if it has become too expensive.

Nvidia (NVDA) has been a standout performer, becoming a key player in the stock market this year. The company's position as a leader in artificial intelligence (AI) has driven impressive sales and earnings growth. Currently, Nvidia's share price reflects an approximate 180% increase year-to-date, marking a continuation of its impressive upward trend.

This rise is part of a broader trajectory that has seen Nvidia's share price skyrocket nearly 860% since the beginning of 2023 and over 2,650% in the last five years. As a result of these substantial gains, Nvidia's price-to-earnings (P/E) ratio has reached around 66, indicating a high valuation compared to its earnings.

Understanding Nvidia's Growth Potential

The significant stock price growth could raise concerns about whether the current valuation is justified. However, looking at Nvidia's recent financial performance provides a different perspective. For instance, the company's revenue surged by 205% year-over-year for the first half of fiscal 2025, while earnings per share skyrocketed by 285% during the same period.

With growth expectations remaining strong, Nvidia's forward price-to-earnings-to-growth (PEG) ratio stands at approximately 0.36. Typically, a PEG ratio below 1.0 suggests that a stock is undervalued, indicating that there might still be room for price appreciation based on its expected earnings growth.

While it's reasonable to believe that Nvidia's rapid sales and earnings growth will eventually slow, the company’s leading position in the AI sector, along with its momentum and favorable PEG ratio, favor the outlook for Nvidia stock. Additional catalysts, such as the anticipated release of its next-generation Blackwell processors later this year, could further boost sales and earnings.

The interest in graphics processing units (GPUs) for AI applications is expected to undergo cyclical fluctuations. However, the overarching trend of AI's growth indicates that it is still in its early stages, placing Nvidia in a critical role as this technology continues to develop.

Note: The author does not hold positions in any of the stocks mentioned. Disclosure policies apply to investment recommendations.

Nvidia, Stocks, Growth