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Key Insights:
- Data shows that the NVIDIA stock is cheap despite the $4.3 trillion valuation.
- The company’s networking business is growing and highly overlooked.
- Wall Street analysts are highly bullish on the NVDA stock price.
NVIDIA stock price closed at $182.74 on Aug. 8, up 1.09% for the day, with after-hours trading lifting it slightly to $182.83. The record-high close extended a rebound that began in April when it bottomed at $86, bringing year-to-date gains to 35%. The move came amid renewed bullish sentiment in the Nasdaq and technology sector, with investors betting on AI growth and sustained demand for NVIDIA’s products. Still, the NVDA stock price likely has more upside ahead, helped by at least five key catalysts.
NVIDIA Stock Price is Still Undervalued
At face value, NVIDIA looks like the most overvalued company in the United States as its market capitalization is nearing the important milestone of $4.5 trillion.
However, a closer look at key multiples shows that the company is less valued than expected. For example, NVIDIA has a forward price-to-earnings ratio of 43, much higher than the sector median of 29. However, the valuation multiple is lower than that of other top companies like AMD, Palantir, and Broadcom.
The P/E ratio often has a major limitation in that it does not consider a company’s growth. As such, the PEG ratio, which looks at a company’s P/E and its growth, shows that it is fairly valued. NVIDIA has a PEG ratio of 0.71 and a forward multiple of 1.4, lower than the sector median of 1.84.
In its recent financial results, Palantir compared the top companies in terms of the rule-of-80, which compares its growth and profitability. As the chart below shows, NVIDIA has a rule-of-80 multiple of 122%, which is the best among the biggest companies.
Strong Networking Technologies
The main reason why the NVIDIA stock price has surged in the past few years is its growth in the artificial intelligence and data center businesses. This robust growth has led investors to overlook some of its other businesses that are equally doing well.
One of these businesses is its networking segment, which comprises the NVLink, InfiniBand, and Ethernet solutions. The business made over $12.5 billion in annual revenue last year, a tiny amount of the $115 billion the data center segment made.
Its most recent results showed that the segment made $4.9 billion in the first quarter, and there are odds that its momentum is continuing. Most importantly, the networking segment is making more money and growing faster than gaming, NVIDIA’s second-biggest segment.
AI Data Center Spending Boom is Not Slowing Down
NVIDIA stock price pulled back earlier this year as investors predicted that the AI bubble was about to burst. These concerns accelerated after DeepSeek, a Chinese company launched a model that cost much less than others.
The fears of the AI bubble bursting have eased this year as companies have continued to boost their AI spending. For example, the top hyperscalers like Microsoft, Amazon, Google, and Meta Platforms have already spent $155 billion this year and their guidance points to more upside.
NVIDIA will be the biggest beneficiary of this trend as it is the biggest provider of AI GPUs.
NVDA Stock Has Bullish Technicals
The other reason the NVIDIA stock price has more room to run is that it has strong technicals. It has jumped above all moving averages and the important support level at $152.
The Directional Moving Index (DMI) has continued rising, a sign that it has the momentum. Therefore, the path of the least resistance for the NVDA stock price is bullish, with the next target being $200. Soaring above that level will bring the next target of $250 into view.
Analysts are Bullish on NVIDIA
Additionally, data compiled by Yahoo Finance shows that the average revenue guidance for the second quarter is $45.7 billion, with the most bullish one having a target of $52 billion.
These analysts see the full-year revenue growing to $201 billion, representing a 54% annual sales growth. NVIDIA has a long record of beating analysts’ estimates in terms of revenue and profits.
In recent statements, analysts at Bank of America and Morgan Stanley predicted that the NVDA stock will jump to $250 in the near term.
Disclaimer
This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.
