If you’re wondering what to do with NVIDIA stock right now, you’re not alone. Over the past few years, NVIDIA has captured the imagination of both Wall Street and individual investors. After a surge of 1204.9% in just three years and an increase of 1299.4% over five years, you might be asking yourself if this growth is sustainable or if the momentum is slowing down. So far this year, the stock is up 31.3%. Even during a relatively quiet month, NVIDIA gained another 3.5%, with the last week adding 3.8% to its already impressive performance. Recent news has yet to temper that excitement. While U.S. officials confirmed they are not taking a stake in NVIDIA, discussions about government investments in other sectors have fueled further debates about tech regulation and national support. Meanwhile, China’s ambitious plans to triple its AI chip production by 2026 demonstrate that NVIDIA’s global dominance is being challenged. Within the company, NVIDIA’s decision to halt H20 AI chip production in China highlights the need to continuously adapt to a rapidly changing regulatory and competitive environment. Up to now, these challenges have not derailed the long-term momentum of the stock. So, is NVIDIA undervalued, overhyped, or somewhere in between? According to our checks, NVIDIA scores 1 out of a possible 6 for undervaluation—a modest score that suggests a premium is reflected in its current price. However, numbers only tell part of the story. Let’s break down the valuation methods used and explore what might actually be a better way to determine if NVIDIA deserves your attention at today’s price. NVIDIA scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Discounted Cash Flow (DCF) model estimates what a business is worth today by projecting its future cash flows and then discounting those values back to the present. This approach helps investors gauge whether a stock is trading at a fair price, given its expected future performance.
For NVIDIA, the current Free Cash Flow (FCF) stands at $72.1 billion. Analysts project significant growth in this cash flow, with projections for 2030 reaching $210.2 billion. Estimates from analysts typically cover about five years into the future, while projections beyond that timeframe are extrapolated using established growth rates. Each year’s future cash flow is converted into today’s dollars to account for the value of time and risk.
Based on this model, NVIDIA’s estimated intrinsic value per share is $114.89. However, in comparison to the company’s current share price, this calculation suggests the stock is trading at a 58.1% premium, which is considered overvalued according to DCF standards.
The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies because it relates a company’s market price to its actual earnings. This gives investors a quick sense of how much they are paying for each dollar of profits generated, making it especially relevant for companies with strong, consistent earnings such as NVIDIA.
Typically, a higher PE ratio can justify expectations of faster earnings growth or lower perceived risk. However, if growth slows or risks increase, a lofty PE could signal potential overvaluation. For NVIDIA, the current PE ratio is 57.7x, which is much higher than the semiconductor industry average of 33x, and just below the peer average of 64.5x.
Simply Wall St’s proprietary “Fair Ratio” goes a step further than industry or peer comparisons by factoring in elements like NVIDIA’s robust earnings growth, market cap, profit margins, and risk profile. By tailoring the benchmark to these specifics, the Fair Ratio (55.4x) offers a more accurate valuation yardstick for NVIDIA, reflecting what investors should reasonably pay given the company’s strengths and challenges.
When comparing NVIDIA’s current PE of 57.7x to its Fair Ratio of 55.4x, the difference is moderate, indicating that the market price is close to what one would expect after considering all key performance and risk factors.
Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives.
Narratives are user-generated stories that connect the numbers, such as fair value estimates and forecasts for revenue, earnings, and margins, to a clear perspective on a company’s future. Rather than focusing solely on data, a Narrative helps you map a company’s unique story to a financial forecast and then to a fair value assessment, making your investment decisions more meaningful and relevant.
Accessible on Simply Wall St’s Community page (where millions of investors share insights), Narratives are an easy tool for any investor to use. They enable you to create or explore a variety of market viewpoints and immediately compare Fair Value estimates to current share prices, offering clear, actionable signals to buy, hold, or sell. What’s more, these Narratives update dynamically with new information, such as fresh earnings results or breaking news, helping you stay ahead of changing conditions.
For example, one NVIDIA Narrative values the shares at $341, projecting high AI revenue growth, while another sets fair value as low as $67, assuming heavy competition and shrinking margins. This highlights how investors with different assumptions can arrive at very different conclusions.
For NVIDIA, we’ll make it really easy for you by providing previews of two leading NVIDIA narratives:
NVIDIA’s dominance in AI hardware and data centers, supported by strong R&D and a robust software ecosystem, positions it as a key player for growth over the next 1 to 3 years.
Diversified product lines spanning gaming, automotive, edge computing, and AI help reduce reliance on any single segment and provide resilience against competition.
Although high valuation poses some risk, ongoing innovation and expanding demand for AI workloads contribute to the long-term investment outlook, provided that geopolitical and supply chain challenges are monitored.
NVIDIA’s leadership in AI and data center hardware is driving strong demand; however, future growth may attract intensified competition and margin pressures, particularly as rivals narrow the technology gap.
Sales expansion in gaming, autonomous vehicles, and new platforms such as Omniverse offers growth opportunities, but these segments may experience slower growth and face challenges from evolving consumer trends and new entrants.
Key risks include supply chain disruptions, high product pricing that could limit consumer uptake, and regulatory hurdles that may impact acquisition-driven growth strategies.
NasdaqGS:NVDA Community Fair Values as at Aug 2025
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.
