NVDA Weak valuation - Opportunity or Trap?
Do you believe that $NVIDIA(NVDA)$’s sinking stock valuation is sending a warning signal about the chipmaker’s prospects to maintaining its booming profit growth ?
Do you think this is true ? Let’s find out.
Valuation Paradox: Cheap Price vs High Growth
NVDA’s stock is currently priced cheaply relative to its earnings, dropping to less than 17x its expected profit for the coming year.
To put the drop into perspective, the stock's price multiple was twice as high in 2025, even though company's financial growth was slower back then. (see below)
Additionally, that valuation has fallen significantly from more than 25x estimated earnings as recently as May 2026.
Management’s View: Misunderstood & Mispriced
The gap between (1) NVDA's strong business performance and (2) its low stock price led CEO, Jensen Huang to call NVDA "the world's first and only growth value stock”.
Speaking at a Goldman Sachs technology conference in early September 2026, he stated that the company is incredibly “misunderstood”.
He added that the company is both expanding its business and capturing more value at the same time.
Market Dynamics & Sector Performance
According to TWC, Snr portfolio manager, Eli Horton:
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NVDA's stock price has dropped significantly because investors are skeptical whether the company can keep up its current high earnings.
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The stock’s weak performance is unexpected given the company's strong financial health, showing that the market actually expects lower results than what analysts are predicting.
NVDA’s stock remains cheaply priced (discounted) even after rising for 5 consecutive days through Mon, 21 Sep 2026.
The recent bounce happened as chip stocks recovered from a sharp drop on 14 Sep 2026, when concerns over calls to slow down advanced AI model development sent the Philadelphia Stock Exchange Semiconductor Index (SOX) down by nearly -6.0%. (see below)
On Mon, 21 Sep 2026, the SOX index jumped +4.3%, its best day since 4 Aug 2026. (see above)
This comes, after early signs of success for $Meta Platforms, Inc.(META)$’s new AI agent boosted optimism about chip demand.
NVDA’s shares are up +20.91% (as of 22 Sep 2026), a performance that ranks as 2nd best among the Magnificent Seven technology giants after AAPL at +24.14%. (see above)
However, the advance pales in comparison to other semiconductor makers.
Meanwhile, the SOX index is up almost +76% YTD, led by:
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$Micron Technology(MU)$ - up +242.75% (as of 22 Sep 2026).
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$Intel(INTC)$ - up +208.06%.
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$Advanced Micro Devices(AMD)$ - up +174.51%.
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NVDA is the 5th-worst performer in the index, which is priced at 20x estimated profit.
Even though investors remained worried about future spending on AI equipment due to (a) soaring interest rates and (b) backlash against building new data centers, there are no signs that AI-infrastructure investments will slow down anytime soon.
Growth Projections vs Margin Headwinds
NVDA's revenue and net income are expected to jump +90% and +99% respectively in fiscal 2027, that is an increase from the 65% growth seen in both metrics, the previous year.
Additionally, NVDA reported in August 2026 that fiscal 2028 sales are projected to grow by +70%, that is higher than the 45% growth analysts previously expected.
Rising Competition & In-House Chip Risks
Part of the problem is that NVDA's profit margins are shrinking because components like memory chips are getting more expensive.
Analysts estimate that NVDA's gross margin, which was an impressive +75% in the second quarter, will drop below 72% in the 4th quarter before recovering subsequently.
According to TradeStation, Global head of market strategy, David Russell - NVDA’s profit margins are a major factor holding its shares back.
He expects competition to intensify, as some of NVDA’s biggest customers develop AI chips in-house.
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For instance, META recently touted its home-grown chips, while GOOG has made a business out of its own AI chip.
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Companies want to reduce their reliance on NVDA, so it is conceivable its market position will weaken over time.
That also means gross margins are more likely to go south than improve and that would be a big problem for investors.
Multiples expand when companies are well positioned with potential to get better - NVDA does not offer that.
Another issue is NVDA has become the highest profile member of the AI trade:
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Its share price has gained more than +1,600%; making it the world’s most valuable company, over the past 4 years.
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Sales have jumped from about $27 billion in fiscal year ended January 2023 to an estimated $410 billion in current fiscal year, 2027.
Bullish Analyst Outlook & Entry Point
Last but not least, TCW's Horton notes that it is prudent to question if high spending can last forever, since growth cannot continue endlessly.
However, he points out that NVDA's low stock valuation assumes AI spending will slow down, which would only happen if (a) big tech companies cut back or (b) government regulations delay things.
He adds that neither of above 2 scenarios seems likely, thus making NVDA's shares look quite attractive.
While nobody knows for sure how the stock will perform, he feels the current setup is still very strong and the odds are favourable.
He concludes that the stock's valuation offers a great entry point for investors.
When NVDA trades at a bargain price, the market usually bet on a sudden slowdown.
However, if slowdown did not materialize and instead business keeps growing rapidly, that fear creates a rare chance to buy in early.
Technical Analysis.
As a precaution to ensure what the ‘experts’ are saying holds true (at least for the current moment), will be looking to NVDA’s technical indicators of (a) Simple Moving Average (SMA), (b) MACD and (c) RSI for clues.
Simple Moving Averages (SMA).
On Wed, 23 Sep 2026, NVDA ended the day lower by -1.47% at $225.51 per share.
This is above its 3 SMAs of 20-day ($221.15), 50-day ($215.38) and 200-day ($199.06).
Overall a technical picture that is bullish over the medium and long term, but more mixed in the short term.
The averages are arranged in bullish order:
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20-day SMA> 50-day SMA> 200-day
This creates a positive moving-average structure.
However, the stock is only about $4.36, or +1.9%, above its 20-day average. Therefore, the short-term trend is positive but not far removed from a potential test of near-term support.
MACD.
Both MACD line (2.20) and signal line (1.72) are above the Zero line. This is generally a bullish configuration, indicating that the shorter-term price trend remains stronger than the longer-term trend.
The MACD line sitting above the signal line , producing a positive difference / divergence of 0.48. This means recent upside momentum is stronger than momentum represented by the signal-line average.
However, the chart’s latest MACD lines appear relatively close together compared with their wider separation during stronger earlier rallies.
This suggests the bullish momentum is present but not especially forceful.
RSI.
With a 14-day RSI at 55.72, it also indicates a relatively stronger, bullish momentum environment.
I feel NVDA remains attractive for long-term investors who are willing to look past the doubt, and might just find that today's cheap stock price is tomorrow's missed opportunity. Agree ?
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Rising treasury yields of 10Y, 20Y & 30Y are all above 5% level, US broader market dip on inflation fears and NVDA director stock sale all contributed to its slip.
Will it cont'd when Thursday trading resumes ?
Stronger-than-expected S&P Global PMI data, coupled with a weak $70 billion 5-year Treasury auction, pushed the benchmark 10-year US Treasury yield to 5.11% — its highest level since 2007.
Looks like no need to guess how US market will trade on Thursday - right ? Here's hoping futues indexes will change again closer to Thu trading hours.
By the time 4pm arrived, it has fallen by - 0.41% to close the day at $224. 59 pershare.
Will it continue to pullback on Friday?
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