MW Nvidia's stock is unusually cheap, one analyst says. Why he thinks there are big gains ahead.
By Britney Nguyen
Over the past decade, Nvidia's stock has rarely been so inexpensive relative to the broader chip sector
Nvidia, led by CEO Jensen Huang, has seen its stock climb about 26% so far this year.
With a quick look at conventional metrics, Nvidia's stock might not entirely scream "cheap." But the stock is unusually inexpensive when doing a deeper dive, according to a Bernstein analyst.
To start, Bernstein's Stacy Rasgon flagged that Nvidia's stock (NVDA) was trading at just under 25 times forward earnings as of Thursday's close. That "may not seem particularly cheap for your ordinary stock," he said, but for Nvidia, it's noteworthy. The price-to-earnings ratio, down 27% since the start of the year, ranks in the 11th percentile for the stock over the past 10 years.
In other words, the stock is trading "pretty cheap on an absolute basis," Rasgon said in a Friday note.
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Those statistics get more extreme than that. Nvidia's stock is currently trading at about a 13% discount to the PHLX Semiconductor Index SOX, Rasgon said, when looking at their respective forward P/Es. In the past decade, he said that there have only been 13 days when the chip maker's stock has been cheaper on a relative basis.
Going back a decade, Nvidia's stock has rarely been so cheap relative to the PHLX Semiconductor Index.
Alongside other artificial-intelligence plays, Nvidia's stock has been challenged recently by fears over spending and competition in the chip space. Nvidia's stock is up 32% so far this year - a "decent overall performance," according to Rasgon. But disappointingly for investors, the stock hasn't done much since July, he added. And Nvidia's stock had lagged behind the PHLX Semiconductor Index, which is up 41% for the year
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Investors who have bought into Nvidia when it was about this cheap "have historically done very well," Rasgon said. Looking at prior instances in the past decade where Nvidia's stock traded below a forward P/E of 25 times, the average subsequent one-year return has been more than 150%, he said, and there have been "zero instances of a negative drawdown when held over that period."
"Coupled with what appears to be extremely attractive valuation we believe the set-up is looking good into the new year; we would be buyers here," Rasgon added.
Massive capital expenditures by hyperscalers "look fine at this point," he noted. And while some investors had been fearful that Nvidia's graphics processing units faced competition from Google, which makes an application-specific integrated circuit in partnership with Broadcom $(AVGO)$ "the GPU narrative may be recovering some of its mojo relative to ASICs," Rasgon wrote.
More catalysts could be ahead in 2026, including Nvidia's next-generation Rubin AI platform, slated for the second half of next year, and the company's annual GPU Technology Conference in March. And with the Trump administration recently giving approval for Nvidia to sell its H200 chips to Chinese customers earlier this month, that "may provide some China upside at some point," Rasgon added.
Overall, Rasgon said Wall Street's estimates for Nvidia "appear likely low" relative to the $500 billion revenue opportunity the company said it has through 2026.
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-Britney Nguyen
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December 19, 2025 10:25 ET (15:25 GMT)
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