Think Nvidia Stock Is Expensive? These 3 Charts Might Change Your Mind.
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Nvidia (NVDA 1. 81%) remains one of the best artificial intelligence (AI) stocks on the market. But with the chipmaker now trading at a price-to-sales multiple of 26. 4, many investors may...
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July 9, 2025
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The Motley Fool
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Nvidia (NVDA 1. 81%) remains one of the best artificial intelligence (AI) stocks on the market
But with the chipmaker now trading at a price-to-sales multiple of 26. 4, many investors may wonder if s have gotten too expensive to buy
Don't be fooled: Nvidia stock is still reasonably priced
Nvidia stock isn't as expensive as it seems Nvidia designs graphics cessing units (GPUs) that vide the cessing power required to support modern AI and machine-learning software
The company's gross margins are around 60% -- nearly twice those of competitors Intel -- a reflection of how superior its cutting-edge chips are compared to the offerings of rivals
Nvidia can simply charge more for its ducts due largely to their performance superiority, as well as the value of its widely used software platform, which makes it easier for developers to gram chips for specific tasks
Nvidia's hardware is essentially powering the AI revolution: Most analysts believe it has an 85% to 90% market in AI accelerator chips right now
Because AI infrastructure spending is expected to grow by more than 30% annually through 2033, Nvidia has the potential to grow its sales base aggressively over at least the next decade, and ly beyond
Due to investors' optimism all of this, its s trade at a pricey 26. 4 times sales
But when you measure the stock against the company's fits and bottom-line outlook, the valuation picture imves considerably
Nvidia s currently trade at roughly 51 times earnings
That's still quite a premium
But because earnings are growing so fast, s trade at just 36. 9 times next year's earnings
If it can maintain its high gross margins, the stock's valuation could continue to imve dramatically year after year due to its rapid sales growth
Compared to a competitor Intel, which lost money in each of the last three quarters, Nvidia's valuation looks quite reasonable
To be sure, s aren't cheap, and the stock just hit the $4 trillion market cap threshold
But for patient investors willing to pay an up-front premium, they could still ve fitable
Ryan Vanzo has no position in any of the stocks mentioned
The Motley Fool has positions in and recommends Intel and Nvidia
The Motley Fool recommends the ing options: short August 2025 $24 calls on Intel
The Motley Fool has a disclosure policy.
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