NVIDIA's earnings report may not have been "explosive" enough for some, but Wall Street might have misjudged the situation. With 42% growth crushing most tech giants while P/E ratios become more attractive as the stock rises, analysts point out that now presents a "discounted" opportunity.

Despite concerns that NVIDIA's massive $4.4 trillion market capitalization may have pushed the stock into bubble territory, the company's rapid revenue growth continues to attract investor purchases.

This week, while NVIDIA's earnings report didn't meet Wall Street's expectations for "explosive" growth, data shows its sales growth still outpaces the vast majority of tech companies. According to data compiled by Bloomberg, NVIDIA's revenue is expected to grow by at least 42% over the next four quarters, while the tech-heavy Nasdaq 100 index averages around 10% revenue growth over the same period.

In fact, as analysts raise earnings expectations, NVIDIA shares are becoming cheaper. Currently, NVIDIA trades at a P/E ratio below 33x, down from 35x three weeks ago. The Nasdaq 100 index has a P/E ratio of 27x, and among the 100 companies in that index, 30 companies have higher valuations than NVIDIA, including Starbucks and Netflix.

"If you go back a few years, people would say a company this large couldn't possibly grow this fast," said Bill Stone, Chief Investment Officer at Glenview Trust. "This valuation is absolutely not outrageous, especially for companies with such ultra-high growth rates."

For comparison, consider Palantir Technologies Inc. Its stock has surged 421% over the past 12 months, making it the best-performing stock in both the Nasdaq 100 and S&P 500 indices for 2025. This data analytics software manufacturer is expected to see revenue growth similar to NVIDIA over the next year, but trades at a P/E ratio of approximately 200x, making it the highest-valued stock in the S&P 500.

If NVIDIA, with its $4.4 trillion market cap, had the same P/E ratio as Palantir, its market capitalization would reach approximately $26 trillion, representing a stock price increase of about 500%.

**Boom and Bust**

Even among the few tech companies with massive market capitalizations, NVIDIA's valuation doesn't stand out particularly, despite its much faster growth rate. Microsoft trades at a P/E ratio of 32x, while Apple trades at 30x. Both companies' revenue growth expectations for this fiscal year are just a fraction of NVIDIA's, at 14% and 6% respectively.

The semiconductor industry's history of boom-bust cycles helps keep NVIDIA's valuation in check. Over the past twenty years, the Philadelphia Semiconductor Index has experienced two corrections exceeding 45% due to demand declines. Therefore, investor concerns about a potential cooling in AI computing chip spending - NVIDIA's specialty - are reasonable.

"The only debate is whether growth will go from explosive to zero growth once everyone has built all the data centers," said Paul Meeks, Managing Director at Freedom Capital Markets. "That's what people are worried about."

However, NVIDIA's earnings report suggests this scenario is unlikely to occur in the near term. NVIDIA CEO Jensen Huang stated on Wednesday that the company's AI opportunity is "enormous." He estimates that AI infrastructure spending will reach $3-4 trillion by the end of this decade.

"When you look at the growth rate or the price-to-earnings-growth (PEG) ratio, it suggests NVIDIA's valuation is quite reasonable," said Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott. "We might see P/E ratios rise significantly, possibly as high as 60x."

**Relatively Cheap**

A company's PEG ratio is calculated by dividing its P/E ratio by its profit growth rate. Lower numbers indicate better value. According to Bloomberg data, NVIDIA's PEG ratio of 0.8 is the lowest among the "Magnificent Seven" tech companies and well below its five-year average of 1.5.

This wasn't always the case. In 2023, NVIDIA's forward P/E ratio briefly exceeded 60x before the company reported a series of explosive earnings driven by the "chip arms race." In hindsight, this price proved to be undervalued. Since May 18, 2023, when its valuation peaked at a forward P/E of 63x, NVIDIA shares have gained over 400%.

Richard Clode, portfolio manager at Janus Henderson, notes this is partly because NVIDIA's growth has consistently exceeded Wall Street forecasts for over two years.

"If you have conviction that your 'E' (earnings) will be higher, then actually, NVIDIA's valuation has never been overly challenging," Clode said. "It still isn't."

Stone from Glenview Trust notes that given tech giants like Microsoft and Google parent Alphabet are investing tens of billions in AI infrastructure, there's no reason to expect this trend to disappear anytime soon.

"NVIDIA is the absolute dominant market leader, which should command a valuation premium, especially considering the margins it maintains," Stone said. "At the end of the day, supply still can't meet demand, which is a great position to be in."