Nvidia (NVDA) Valuation Check After Recent Pullback And Easing Share Price Momentum

NVIDIA (NVDA) is back in focus after recent trading left the stock about 7% lower over the past month and roughly 7% lower across the past 3 months, prompting fresh questions about its current valuation.

See our latest analysis for NVIDIA.

While the recent 7 day and 3 month share price returns have been negative and the stock now trades at US$174.19, NVIDIA's 1 year and multi year total shareholder returns remain strong, suggesting momentum has eased rather than disappeared as investors reassess growth expectations and risks around AI related demand.

If NVIDIA's recent pullback has you reassessing your tech exposure, it could be a good moment to scan other high growth tech and AI stocks that might fit your watchlist next.

So with NVIDIA still showing strong multi year shareholder returns yet trading below some analyst targets and its own intrinsic estimate, is the recent pullback a chance to buy, or is the market already pricing in future growth?

Most Popular Narrative: 2.3% Overvalued

According to the most followed NVIDIA narrative, the fair value sits at $170.26, slightly below the current $174.19 share price, which sets up a tight valuation debate.

Nvidia will hit $400b annual revenue in 5 years time. ~90% of revenue will come from data centre customers. This equates to $90b / quarter, or equivalent to 30,000 Blackwell racks (at ~$3m per rack). At 150kW per Blackwell rack, data centres will need to expand at 4.5gW/quarter to keep up. Global data centres are expected to increase wattage at 15% per year, which in 5 years time will be close to the 18gW annual increase required. AI (GPU) data centres have higher yields than other data centres, so some amount of use conversion is also expected.

Read the complete narrative.

Curious what revenue mix, profit margins and future earnings multiple have to line up for that price tag to make sense? The narrative spells it out. The assumptions behind the fair value are bolder than many analysts are using right now. The full story connects revenue scale, profitability and future valuation in a very specific way.

Result: Fair Value of $170.26 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that story depends on Nvidia maintaining a firm grip on AI hardware and software, while potential regulation or cheaper alternatives could quickly change the picture.

Find out about the key risks to this NVIDIA narrative.

Build Your Own NVIDIA Narrative

If you are not fully on board with this story or simply prefer to test the numbers yourself, you can build a custom view of NVIDIA in just a few minutes, starting with Do it your way.

A great starting point for your NVIDIA research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If NVIDIA is already on your radar, do not stop there. Widening your research set now could help you spot opportunities that others might overlook.

• Spot potential value plays early by reviewing these 867 undervalued stocks based on cash flows that align with your expectations on cash flows and balance sheet strength.
• Ride the AI wave on your terms by checking out these 29 AI penny stocks that match the kind of growth profile and risk level you are comfortable with.
• Add diversification with income potential by scanning these 11 dividend stocks with yields > 3% that may suit a portfolio focused on regular cash returns.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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