Nvidia's Stock May Still Be Undervalued Despite Strong AI-Fueled Growth

Nvidia's (NVDA) stock has had a remarkable run over the past five years, delivering returns of about 9.3 times its initial investment. However, despite this impressive performance, current valuation checks suggest that the company may still be underpriced.

The Discounted Cash Flow (DCF) model estimates Nvidia's intrinsic value to be around $252 per share, which is slightly higher than its current market price. This suggests a modest discount of 8.4% for investors who buy into the stock now.

One reason for this discount is that expectations surrounding long-term AI cash generation are already built into the price. The planned acquisition of Hugging Face for $12.9 billion may have contributed to this phenomenon, as it indicates the market's confidence in Nvidia's ability to drive growth through its AI infrastructure.

However, not all analysts agree on the stock's valuation. Some see it as undervalued compared to sector benchmarks and a tailored fair P/E ratio of 48.9x. This view is based on the company's growth profile, margins, scale, and risks, which may support a higher earnings multiple than the current 28.8x.