Nvidia (NVDA) is often held up as the poster child of the AI boom - and just as often accused of being “overvalued.” But if you dig into the numbers, the narrative doesn’t match reality.
On a forward price-to-earnings (P/E) basis, Nvidia actually trades cheaper than some of America’s most beloved consumer giants.
Costco (COST), known for its warehouse bargains, sports a forward P/E of about 48 with Walmart (WMT), the retail king, trading at 39 times next years earnings estimates.
What about Nvidia?
Based of the estimates of 55 analysts, the world’s largest publicly traded company trades with a forward P/E ratio of 31. In other words, you’re paying a lower multiple for a company growing exponentially - not just incrementally
With earnings expected to grow by 36% next year, Nvidia is trading with a PEG ratio of less than 1.0 – the PEG ratio compares the P/E ratio to the growth estimate. A number less than 1.0 in this market is considered “cheap”.
And analysts expect earnings to continue compounding at an high pace over the next several years, driven by next-gen products like the Blackwell Ultra and Rubin chips, as well as sovereign AI projects worth billions.
By contrast, Costco and Walmart offer predictable but modest earnings growth - typically in the high single digits to low double digits. Both companies are expected to growth earnings between 11% and 12% next year – not bad numbers, but not enough to justify such high valuations.
That being said, their premium valuations reflect stability, not explosive expansion.
So why do many investors still call Nvidia overvalued?
Partly it’s fear of the “law of large numbers” - the idea that growth naturally slows as a company gets bigger. Some analysts also warn GPU demand could plateau by 2026, making today’s momentum look unsustainable. And when a stock has tripled or quadrupled in a short time, skepticism is almost inevitable.
But viewed through a forward-looking lens, Nvidia isn’t priced like an overheated bubble stock. It’s a market leader with unmatched AI exposure, trading at a lower multiple than retail stalwarts - yet offering growth prospects they can’t touch.
That’s not hype. That’s math.
Here’s to the future,
Matt McCall
Editor, Market Insights
