Nvidia stock may be undervalued as DCF points to 13.5% upside

The article points out that Nvidia's stock has had a strong five-year run with an 855.5% return, but current valuation checks suggest there may still be upside. The DCF model, which projects future free cash flows over the next decade and tapers growth beyond, arrives at an intrinsic value of $251 per share, implying the shares trade about 13.5% below that. This is notable given the company's latest twelve-month free cash flow is about $126.7b, a very high figure for any listed company.

The key swing factor for the valuation gap is how the market prices Nvidia's expansion into AI platforms and data center infrastructure. The agreed $12.9b acquisition of Hugging Face increases investment needs and potential AI platform reach, which may explain why the market applies a discount despite strong cash generation. Risks include heavier investment, regulatory scrutiny, and AI spending cycles that could affect the timing of future cash flows. The broader checks are mixed, with a value score of 4.0 indicating neither a clear bargain nor an obviously expensive stock. Ultimately, investors must weigh whether the current discount to intrinsic value and earnings multiples is sufficient compensation for the execution and policy risks associated with Nvidia's AI expansion plans.