Why This AI Growth Stock Still Looks Cheap at Current Valuations

Nvidia commands attention in today’s investment landscape, and not just because of its dominance in artificial intelligence. With a forward P/E ratio of 24 times and a forward PEG ratio of 0.65, this growth stock presents an interesting paradox—a company with explosive growth trading at metrics that suggest undervaluation. To understand why, you need to look beyond the headlines and examine what’s actually driving the business.

The Math Behind the Value: Understanding Why Investors See Opportunity

The key to evaluating any growth stock lies in looking at the PEG (price/earnings-to-growth) ratio. When this figure falls below 1.0, it suggests the market may not be fully pricing in the company’s growth prospects. At 0.65, Nvidia’s PEG ratio indicates something remarkable: a company experiencing extraordinary expansion yet valued as though its best days might be behind it—which couldn’t be further from the truth.

The numbers speak for themselves. In the most recent quarter, Nvidia grew its revenue by 62% to $57 billion. But this single data point doesn’t capture the full picture: that same quarter represented nearly a tenfold increase from just five quarters earlier, when the company generated $5.9 billion in revenue. For a growth stock of this magnitude, such acceleration is not typical. It suggests structural demand rather than temporary trends.

Building the Foundation: How Nvidia Powers the AI Revolution

Nvidia’s position in the artificial intelligence infrastructure buildout has transformed it into an essential component of the tech industry’s pivot. Nearly every major technology company racing to develop advanced language models—with the exception of Alphabet—relies on Nvidia’s GPUs to train these systems. Meanwhile, cloud computing providers are investing unprecedented sums to construct data centers capable of handling the computational demands of modern AI services.

The company’s competitive advantages run deep. While competitors develop custom ASICs (application-specific integrated circuits) designed for particular tasks, these chips lack the flexibility and adaptability that GPUs provide in a rapidly evolving technological landscape. Additionally, the vast majority of AI foundational code has been written on Nvidia’s CUDA platform, creating network effects that competitors struggle to overcome. The company’s proprietary NVLink interconnect system further extends this moat by enabling its processors to communicate at speeds that allow them to function as integrated systems rather than standalone units.

Expanding Beyond Silicon: The Evolution From Chip Maker to Solutions Provider

What many investors overlook is Nvidia’s transformation beyond being a pure GPU supplier. The company now delivers comprehensive AI solutions that combine its processors with complementary networking components and related hardware. This transition has proven remarkably lucrative: the networking segment experienced 162% revenue growth last quarter, reaching $8.2 billion and becoming the fastest-growing division in the business.

This diversification matters for long-term growth stock investors. It signals that Nvidia’s opportunity set extends far beyond selling individual chips. The company is increasingly positioned as an infrastructure partner for the entire AI ecosystem—from training foundational models to deploying them at scale.

Can This Momentum Continue? Assessing the Structural Shift

While competition has intensified, Nvidia maintains clear technological and economic advantages that position it to benefit from what appears to be a structural shift rather than a cyclical boom in computing infrastructure. The combination of installed base advantages (CUDA), technical leadership (NVLink), and ecosystem effects creates meaningful barriers for competitors.

For growth stock investors, the relevant question isn’t whether Nvidia will face competition—it clearly will—but whether that competition materializes fast enough to slow adoption of AI infrastructure over the next several years. Based on current evidence, industry experts across cloud providers, chip designers, and AI companies suggest that AI spending will accelerate well into the future. Countries themselves are now placing massive strategic bets on AI development, indicating that demand may be even more durable than typical technology cycles suggest.

Nvidia’s combination of proven growth trajectory, dominant market position, technical advantages, and reasonable valuation multiple creates the kind of opportunity that growth stock portfolios are designed to capture. As the company continues to monetize the AI infrastructure buildout through both its expanded product offerings and maintained competitive advantages, it’s worth continuing to monitor this stock as a core AI infrastructure play.