Few large companies have grown as fast as Nvidia over the past two years, and yet its stock now looks cheaper, relative to profits, than at any point since 2019. That mix of rapid growth and a falling multiple is unusual, and it raises a simple question about what the market is pricing in.
Market experts at Rubinax examine the numbers behind this shift and what traders should keep in mind.
A Valuation Not Seen Since 2019
Nvidia trades slightly above 27 times its trailing twelve-month earnings, a level last seen in June 2019. Over the past ten years, the average multiple was 61.3, so today’s reading is less than half of that long-term norm.
The shares closed near $217.09, up about 1.4% on the day, giving the company a market value of roughly $5.23 trillion. The 52-week range runs from $164.27 to $243.37, so price sits in the upper half of that band.
Cheap Is Relative
A low multiple for Nvidia does not make the stock cheap in absolute terms. The S&P 500 trades at about 24.9 times trailing earnings, and on a cyclically adjusted basis the index sits near its second-highest valuation on record.
Several of its large technology peers, including Alphabet, Amazon and Meta, also carry lower trailing multiples. Still, Nvidia stands out on forward earnings: its forward multiple, based on analyst projections, is lower than that of any other member of the group.
The Math Behind The Drop
A price-to-earnings ratio falls only when earnings grow faster than the share price. That is exactly what has happened here, and it is the only mathematical explanation.
In the second quarter of its fiscal year, sales jumped 106% from a year earlier to $92.6 billion, while earnings rose 126%. Management said demand is accelerating, which fits the idea that the business is not deteriorating.
A Famous Skeptic Looks Wrong For Now
In early 2024, a well-known professor of valuation said the stock was too expensive and cut his own position by half. Since then the shares have nearly tripled, and Nvidia has become the world’s largest company.
His model assumed revenue would compound at around 32% a year over five years. Roughly halfway through that period, actual growth has been far above that pace, and management shows no sign of slowing.
Why A Low Multiple Is Not A Guarantee
A low multiple can also mean the market doubts that today’s earnings will last. The worry centers on how much money is flowing into AI data centers, and whether the payoff will justify it. If that spending cools sharply, growth at Nvidia would cool with it.
Local resistance to new data centers adds another risk, because opposition from nearby residents can delay projects and push back orders.
Competition Is Rising
Rivals are gaining ground, though not yet to an alarming degree. AMD competes directly, and some of Nvidia’s biggest buyers are developing their own chips.
That matters because a few large customers drive much of the revenue. Their strong demand lifts sales today, while a shift toward in-house designs could limit gains later.
What The Chart Suggests
Price moved within a narrow range on Monday, between $214.70 and $219.62. Daily trading volume was well below the recent average of about 118 million shares, so the move lacked strong conviction.
A close above $219.62 on rising volume would show that buyers are regaining control, while a drop under $214.70 would suggest the recent pullback from the high near $243.37 is not over. The distance to that high, about 12%, is the first target if sentiment improves.
Traders should also remember that a low valuation does not protect a stock from short-term swings. Earnings reports, interest rate news and shifts in sentiment about artificial intelligence can all move the shares quickly. Waiting for a daily close beyond a key level, and keeping position sizes modest, helps avoid reacting to a single spike.
Conclusion
Nvidia trades near $217, with a trailing multiple of about 27, the lowest in seven years, because earnings have grown faster than the share price. The $214.70 level is the support to watch, while $219.62 is the first hurdle for buyers.
Traders following Nvidia stock strategies should watch spending on AI infrastructure, competition from rivals and customers, and the reaction around these two levels, since these factors are likely to decide whether the valuation gap closes through a higher price or through slower growth.