Nvidia shares have risen just 10% this year, sharply trailing the 71% gain in the Philadelphia Semiconductor Index, according to market data from BIT (bit.com) cited by BlockBeats on July 25. That has left Nvidia as one of the worst-performing heavyweight names in the sector despite the broader rally in chip stocks.
Valuation has compressed to levels not seen in years
Morningstar analyst Brian Colello said Nvidia’s current price of roughly $212 implies the market is effectively assuming the company will deliver almost no growth after 2027. He said fair value is closer to $280, which he pegged at about 16x expected fiscal 2029 revenue.
On an EBITDA-based forward valuation, Nvidia is trading at around 17x, far below its five-year average of 36x and near its lowest range since July 2021.
For comparison, AMD is trading at 53x forward earnings and its shares have gained 142% this year.
The bear case focuses on new challengers and scale limits
John Belton, a portfolio manager at Gabelli Funds, said investors are chasing companies with the strongest supply-demand imbalance and the clearest untapped growth opportunities. In his view, Nvidia currently fits neither of those conditions.
The bearish argument has centered on two concerns. First, a growing list of challengers is entering the field. Startups including SambaNova and Cerebras have launched in-house chips, while Google, Amazon, Meta, Microsoft, OpenAI, and Anthropic are all pushing ahead with their own chip efforts. Second, some investors believe Nvidia may be approaching a ceiling in terms of scale.
AMD’s first AI server rack system, Helios, is scheduled to ship later this year and is aimed directly at Nvidia’s Grace Blackwell and Vera Rubin lines.
Bulls argue growth, market share, and ecosystem strength are being missed
Bulls take a different view. Nvidia’s revenue is expected to rise 42% to $560 billion next fiscal year, followed by another 23% increase the year after. AMD, by contrast, is projected to reach only $78 billion in 2027. On that basis, the valuation gap of more than 2x is not easily explained by growth differentials alone.
They also argue Nvidia’s share in the inference chip market has actually increased. The company’s ability to hold up through a down cycle may also be underappreciated. If AI investment cools, many companies that only recently began developing their own chips may abandon those plans and return to Nvidia’s ecosystem. Under that scenario, an AI winter could hit emerging chip designers harder than Nvidia.
Colello expects both Nvidia’s annual revenue growth and adjusted earnings-per-share growth to exceed 45% through fiscal 2029. His conclusion is that the market has overpriced the competitive threat facing the company.