Nvidia Stock: Cheap or Justified Valuation?

Nvidia (NVDA) is once again at the center of Wall Street’s attention ahead of its earnings report. However, this time, the level of enthusiasm appears more tempered. While analysts remain bullish, expectations of a massive revenue beat—something that has fueled previous rallies—have diminished. With Nvidia’s stock up over 200% in the past year, investors are questioning whether the current valuation still presents an opportunity or if it has already priced in the AI boom.

Key Factors Shaping Nvidia’s Trajectory

One of the most significant factors affecting Nvidia’s near-term trajectory is its transition from the Grace/Hopper chip family to the new Blackwell platform. Initially expected in early 2025, the full production ramp-up for Blackwell is now pushed to mid-2025. This delay may limit Nvidia’s ability to deliver the kind of upside surprises investors have come to expect.

However, demand for Nvidia’s AI chips continues to outstrip supply. Even as hyperscalers like Amazon (AMZN), Alphabet (GOOGL), and Meta (META) reevaluate their AI spending, Nvidia remains in a dominant position. In the interim, the company is expected to continue selling its older Hopper-based H100 chips, ensuring stable revenue streams despite product transition challenges.

Nvidia Earnings Expectations

• Last quarter revenue: $35.08 billion (+$1.9 billion vs. estimates)
• Current quarter consensus: $38.08 billion revenue, 83 cents per share
• Expected beat: ~$1.8 billion (vs. ~$2 billion previous trend)

Wall Street has become accustomed to Nvidia exceeding expectations by nearly $2 billion in both revenue and guidance. If the company delivers a more modest beat—closer to the consensus—it could be met with a muted or negative stock reaction. However, a more measured earnings beat might also indicate stability, attracting long-term institutional investors rather than just momentum traders.

Nvidia Valuation: Cheap or Fully Priced?

Some analysts argue that despite its massive rally, Nvidia remains undervalued relative to its growth potential.

Price-to-earnings multiples

• 23x Truist’s fiscal 2026 earnings estimates
• 25x broader consensus estimates
• 30x next-12-month earnings estimates

Analyst price targets

• $204 (Truist Securities)
• $190 (Evercore ISI)

Compared to other high-growth AI stocks, Nvidia’s valuation may still be attractive given its continued dominance in the AI chip market. Institutional investors are likely monitoring whether Nvidia can sustain its pricing power and product transition execution.

Competitive Threats: Is DeepSeek a Real Risk?

A recent development raising concerns is Chinese AI startup DeepSeek, which claims to have built AI servers at a fraction of current costs using older-generation Nvidia chips. While this initially spooked investors, AI engineers suggest DeepSeek’s cost improvements are evolutionary rather than truly disruptive.

Additionally, Nvidia’s moat extends beyond just hardware. The company’s software ecosystem (CUDA, AI frameworks, and cloud integrations) creates a high switching cost for existing customers. DeepSeek’s hardware alone is unlikely to challenge Nvidia’s dominance in high-performance AI computing.

The Bottom Line: What Comes Next for Nvidia?

While Nvidia may not deliver another record-breaking earnings beat this quarter, the long-term AI growth story remains intact. Analysts generally agree that as the Blackwell platform rolls out fully in the second half of 2025, Nvidia’s financials will likely see renewed acceleration.

For now, investors must weigh whether Nvidia’s current valuation already reflects this anticipated growth or if Wall Street’s lowered expectations create a new buying opportunity. Key factors to watch in the earnings report include:

• Clarity on Blackwell demand
• AI infrastructure spending trends from hyperscalers
• Gross margins and pricing power retention

If Nvidia can provide strong guidance and confidence in Blackwell’s demand, even a modest earnings beat could be enough to drive the next leg higher. Additionally, if AI infrastructure spending continues to rise as anticipated, Nvidia’s dominant market position could justify even higher valuations in the years ahead.