Editor’s Note: Back in April 2024, despite Nvidia’s 500% surge in under a year and a half, Director of Trading Anthony Summers gave the stock a “Slightly Undervalued” rating right here in his Value Meter column.
Some might’ve been skeptical that the stock had that much upside left… but Anthony’s rating turned out to be spot-on. Over the next seven months, Nvidia’s share price rocketed up another 69%.
With all the uncertainty swirling around the tech sector right now, is the AI titan still a bargain? Find out below…
– James Ogletree, Managing Editor
Since the turn of the century, Nvidia (Nasdaq: NVDA) has completely transformed itself from a gaming graphics card maker into the undisputed leader in AI computing.
The company invented the graphics processing unit, or GPU, back in 1999, but it’s CEO Jensen Huang’s vision of accelerated computing that has positioned the company at the forefront of the AI revolution.
Today, Nvidia’s platform powers everything from gaming PCs to massive data centers, self-driving cars, and AI factories around the world. Every major cloud provider and AI company now relies on Nvidia’s chips, software, and networking technologies.
In fact, Nvidia’s Data Center segment alone contributed $115.2 billion in revenue for fiscal 2025, up a mind-boggling 142% from the prior year. The company is also currently ramping up production of its next-generation Blackwell architecture chips, which are already seeing tremendous demand for AI training and inference.
Overall, Nvidia reported staggering revenue of $130.5 billion in fiscal 2025, up 114% from the previous year, and is forecasting first quarter 2026 revenue of $43 billion, which would represent 10% growth over the most recent quarter.
Even more impressive, the company generated over $60.7 billion in free cash flow in fiscal 2025 – a huge jump from $26.9 billion a year prior. With gross margins hovering around 75%, Nvidia’s profitability puts most tech companies to shame.
The stock was on a scorching hot streak until a few weeks ago, when it began to slide due to concerns about the tech sector and the economy.
After hitting lows of about $10 in 2022, the stock rocketed more than 15-fold, but it’s since fallen by nearly 25%.
This massive surge followed by such an abrupt decline has many investors unsure of what to do next. Those on the outside looking in may wonder if they’ve missed the boat… while those who already own the stock might be thinking it’s time to abandon ship.
At first glance, Nvidia’s enterprise value-to-net asset value (EV/NAV) ratio of 36.7 might make your eyes water. It’s a whopping six times higher than the average of 6.12 for similar companies.
Normally, this would have value investors screaming “overvalued” from the rooftops. But here’s where things get interesting.
Nvidia’s free cash flow-to-net assets (FCF/NAV) ratio is an eye-popping 26.56% – more than triple the 8.28% average for similar companies. In simple terms, Nvidia is squeezing over three times more cash out of each dollar of assets than its peers.
What’s driving these exceptional results? It’s simple: Nvidia has become the essential pick-and-shovel provider for the AI gold rush.
While some may balk at Nvidia’s lofty valuation, our Value Meter sees a company that’s growing at an unprecedented rate while maintaining industry-leading profitability. Nvidia’s ability to generate free cash flow at levels far beyond industry norms suggests its premium is justified – and potentially even understated.
In a market filled with speculative AI plays that are burning through cash, Nvidia stands alone as a cash-generating machine leading a once-in-a-generation technological shift. For long-term investors willing to look past short-term volatility, Nvidia continues to offer compelling value despite its meteoric rise.
The Value Meter rates this one “Slightly Undervalued.”
What stock would you like me to run through The Value Meter next? Let me know here.