Nvidia Undervalued, Says Jim Cramer, as Analysts See 70% Growth Ahead

Nvidia's recent Q2 2027 revenue jump of 106% to $96.2 billion, combined with strong growth and a 74% non-GAAP gross margin, has analysts bullish on the company. Analyst Pierre Ferragu expects Nvidia's stock to reach $400 within 18 months based solely on earnings growth, driven by CEO Jensen Huang's forecast of 70% business growth next year.

Nvidia recently returned a record $26 billion to its shareholders after increasing its dividend by an extraordinary 2,400%, signaling more increases ahead. This massive payout highlights the company's strong financial position and commitment to rewarding investors.

However, Jim Cramer disagrees with this optimism, urging Nvidia to launch a massive buyback of about 10% of its shares to correct what he sees as undervaluation. Cramer believes Nvidia is undervalued at 23 times forward earnings, despite its rapid growth and strong profitability, and estimates the cost of such a buyback would be over $500 billion.

Ferragu's earnings-based valuation suggests substantial upside without additional corporate actions, but Cramer's buyback call is dramatic. It remains to be seen whether Nvidia will heed Cramer's advice or stick with its current strategy of rewarding shareholders through dividends and buybacks.