NVIDIA (NVDA) has been elevated to almost mythical status in the era of large language models (LLMs). The company’s GPUs powered the AI training boom, and its stock reflected the market’s belief that this dominance would persist indefinitely. For many, NVIDIA is nothing short of “legendary.”
But legends also face reality checks.
Why It’s Legendary
- Deep Moat in Training: NVIDIA’s CUDA ecosystem and GPU architecture remain unmatched for large-scale training. This software–hardware integration has created significant switching costs for customers.
- Catalyst of the AI Boom: The LLM hype cycle cemented NVIDIA as the default provider for AI infrastructure. Few companies in tech history have enjoyed this level of demand pull and pricing power.
The Normalization Risk
- Training Growth May Plateau: The extraordinary surge of GPU demand was front-loaded by the initial AI gold rush. Once hyperscalers build capacity, incremental growth in training may slow sharply.
- Inference May Not Be GPU-Centric: The bulk of AI’s long-term value lies in inference, and here NVIDIA’s grip is weaker. Custom chips from hyperscalers, specialized ASICs, and even CPU efficiency gains all threaten to shift workloads away from NVIDIA GPUs.
- Expectations Are Extreme: Current valuations price in perpetual hyper-growth. If training stalls and inference diversifies, NVDA could lose its “legendary” aura and re-rate back to more normal multiples.
Valuation Lens
Given these dynamics, a reasonable trading range might be between $70 and $140 per share.
- At the low end (~$70): markets reset NVIDIA as a highly profitable but maturing hardware provider, no longer enjoying runaway AI-fueled multiples.
- At the high end (~$140): NVIDIA retains its leadership in training while carving out meaningful share in inference and networking, justifying a premium but not the sky-high multiples of peak hype.
Bottom Line
NVIDIA has earned its legendary reputation through strong fundamentals and perfect timing. But as the AI market shifts from hype-driven capacity buildouts to sustainable deployment, the stock could just as easily retrace toward “normal” valuations as it could sustain its elevated status.
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Disclaimer
The user Uio96 has a position in NasdaqGS:NVDA. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
