Nvidia trades at 32 times earnings and Microsoft at 23, and a Motley Fool comparison of the two AI heavyweights lands on Nvidia as the better value. Nvidia’s multiple sits barely above the S&P 500 average despite an 85% revenue jump last quarter, while Microsoft’s lower multiple follows a pullback and a $190 billion capex plan.
Nvidia has risen more than 1,700% since its low in the fall of 2022, yet the stock still trades at a P/E ratio of 32 — barely above the S&P 500 average of 29. Microsoft, after pulling back this year, carries a 23 P/E ratio near multiyear lows. Motley Fool analyst Will Healy weighed both and concluded Nvidia looks like the better value of the two.
Nvidia’s run-up has not lifted its multiple
The generative AI boom carried Nvidia’s market cap to $5.1 trillion, the largest among publicly traded stocks. Even so, recent price action makes it the cheapest it’s been since 2019, which Healy calls unusual because investors tend to pay a premium for growth.
Its underlying numbers have not slowed. In the first quarter of fiscal 2027, ended April 26, revenue increased by 85% yearly while net income rose by 211%. Nvidia also holds more than $80 billion in liquidity and spent just $6.5 billion on capex in the last 12 months.
Healy offers two possible explanations for the discount. Growth investors may be pulling back because a $5.1 trillion market cap makes another 10-bagger difficult, and others might feel leery about hyperscaler capital expenditures and wonder how long that spending can last.
Microsoft’s cheaper multiple tracks its challenges
Microsoft trails at a $2.9 trillion market cap, though its dominance in PC operating systems, strength in productivity software and later success in cloud have made it one of the market’s largest companies. In the third quarter of fiscal 2026, ended March 31, revenue rose by 17% annually while net income surged 23% higher.
However, Healy argues the company’s challenges make the low earnings multiple more understandable. A plan to spend $190 billion on capex this year has made some investors uneasy, AI’s ability to perform many software functions has made investors leery of SaaS stocks, and a close relationship with OpenAI has made some skeptical about the strength of Microsoft’s AI. Microsoft still maintains about $78 billion in liquidity.
Where the comparison lands
Healy grants that 23 times earnings is an extremely low multiple for Microsoft and that the market may have gone too far in pricing the company’s troubles into the stock. Nevertheless, he leans toward the chipmaker as the stronger value investing case. According to Healy: “the margin of safety Nvidia provides right now is too obvious to ignore” — even if Nvidia’s 85% revenue growth slows significantly, he writes, it would take considerable deceleration to make a 32 P/E ratio seem expensive.
Competition is unlikely to change that quickly, in his view: even with more companies entering the AI accelerator market, they are unlikely to unseat Nvidia anytime soon.
Source: The Motley Fool
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