By now, you probably agree that Nvidia (NASDAQ: NVDA) is the defining stock of the artificial intelligence (AI) revolution. Since ChatGPT’s public debut in November 2022, the semiconductor giant has experienced extraordinary valuation expansion, climbing from a roughly $400 billion market cap to more than $5 trillion.
Naturally, this parabolic ascent raises an important question: Is Nvidia stock too expensive to buy now?
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Not necessarily. One of the biggest mistakes beginner investors make is confusing a company’s market capitalization with its underlying valuation. Market cap only tells us what a company is worth in the stock market, but it doesn’t reveal how expensive the business is relative to revenue, earnings, or future growth.
Despite Nvidia’s historic appreciation, the company’s earnings have grown even faster than its stock price. As a result, Nvidia currently trades at one of its most attractive valuations in years. That’s why now could be one of the most lucrative opportunities to buy Nvidia stock since the AI revolution began.
Nvidia is more than a chip company
When the AI boom started, Nvidia was mostly known for designing graphics processing units (GPUs). These chips are essential for training large language models (LLMs), giving Nvidia an enormous first-mover advantage over competitors.
Under CEO Jensen Huang’s leadership, Nvidia has quietly evolved into a full-fledged advanced computing platform spanning GPUs, central processing units (CPUs), networking equipment, and software. Its CUDA software ecosystem makes it easier for AI developers to build applications optimized on Nvidia hardware. Meanwhile, products such as NVLink, Spectrum-X networking, and BlueField data processing units are used to connect clusters of processors inside server racks.
Nvidia works with major hyperscalers, including Amazon Web Services (AWS), Microsoft Azure, Alphabet‘s Google Cloud, and Meta Platforms. It also supplies infrastructure to emerging AI companies and cloud providers, including Space Exploration Technologies, more commonly known as SpaceX.
Furthermore, Nvidia is expanding its ecosystem through savvy partnerships. Earlier this year, the company invested $2 billion in Marvell Technology, helping integrate custom AI chips into its NVLink platform. Nvidia also committed $2 billion each to Coherent and Lumentum, strengthening its access to optical networking technologies. Moreover, its relationship with Nokia brings the company’s presence in telecommunications and edge computing.
