Nvidia stock trades at just under 23 times forward earnings, a slim premium to the S&P 500, even though the company grew revenue 106% in Q2. The Motley Fool's Keithen Drury argues the market is underpricing the growth Nvidia and Wall Street analysts expect next year.
Nvidia shares are up 13% in 2026 versus 11% for the S&P 500, according to Drury. He says investors expect more from the chipmaker, which grew revenue 106% in Q2.
Valuation lags the usual year-end pattern
Drury measures Nvidia with the forward P/E ratio, which prices a stock on analysts' estimates for the full fiscal year. Toward the end of a year, that measure can make stocks look somewhat more expensive.
That has not happened this time. In both 2024 and 2025, Nvidia reached 40 times forward earnings before year-end, but it now trades at just under 23 times.
The S&P 500 trades at about 19.2 times forward earnings, so Nvidia carries only a slight premium. Drury reads that as the market expecting market-average growth from Nvidia after this year.
Guidance points to faster growth in 2027
Nvidia disagrees with that expectation. The company told investors on its Q2 earnings call that it expects 70% revenue growth next year, according to Drury. Wall Street analysts expect 68% revenue growth next fiscal year.
Drury says it is rare for a company to give next-year guidance six months before the year begins. He suggests this is likely because many clients have locked in orders for next year.
On next fiscal year's estimates, Nvidia trades at 13.3 times earnings. If the stock doubles and Nvidia hits all projections, it would trade at 26 times trailing earnings, by Drury's math.
Beyond 2027, Drury points to a broad expectation that the AI build-out will last through at least 2030.
Source: The Motley Fool
Trading involves risk.
Risk Disclaimer
