Nvidia stock currently trades at the same forward earnings ratio as the S&P 500 despite expectations for strong growth next year, suggesting potential upside if the company's projected growth materializes. The analyst attributes this opportunity to Nvidia's dominance in supplying GPUs for the AI buildout, supported by massive capital spending from major cloud providers projected to exceed $1 trillion（約160兆円） next year.
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An investment analyst argues that Nvidia, despite being down more than 16% from its all-time high and up only around 6% this year (trailing the S&P 500's nearly 9% gains), currently trades at basically the same forward earnings ratio as the broader market despite expectations for strong growth next year.
Why it matters
The analyst contends this valuation represents major upside potential, since it is unlikely Nvidia will continue trading at such a discount to the broader market once next year's projected growth materializes. The underlying reason is that Nvidia remains at the center of the AI buildout—the company makes graphics processing units (GPUs) and supporting ecosystem that dominate AI processing, and the four major hyperscalers alone are expected to spend $650 billion（約100兆円） on capital expenditures this year, with that figure projected to rise to over $1 trillion（約160兆円） next year.
What to watch
Nvidia's latest-generation Rubin architecture is now shipping to customers and is expected to drive further growth due to markedly increased capabilities. However, Nvidia faces execution risk from other GPU makers and custom chip designers creating application-specific integrated circuits (ASICs) for hyperscalers, though the analyst believes Nvidia is still primed to dominate the accelerated computing market.
Nvidia's stock performance this year has lagged the broader market despite the company's central role in the AI buildout that began in 2023. The analyst's bullish case rests on a valuation disconnect: the stock is priced as if it will grow at market-average rates, when management projections suggest much stronger growth ahead. This gap between current valuation and expected growth creates the upside opportunity the analyst identifies.
The backdrop supporting this view is the scale of infrastructure spending underway. Hyperscaler capital expenditures are expected to grow from $650 billion（約100兆円） this year to over $1 trillion（約160兆円） next year, creating a massive pool of potential customers for Nvidia's GPUs and related hardware. The Rubin architecture rollout and the company's ecosystem support represent the execution mechanism through which the analyst believes Nvidia will capture value from this spending wave. While competitive threats from other GPU makers and ASIC designers do create execution risk, the analyst argues that the breadth of the AI buildout is large enough that Nvidia could lose market share and still be a strong investment—a key hedge against the competitive dynamics the analyst acknowledges.
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