(Bloomberg) -- Nvidia Corp. shares have staged a $1 trillion rebound in two months — and investors are betting the rally has further to go as fears about the chipmaker give way to optimism.
Last week’s earnings report assuaged some key investor concerns: particularly whether US restrictions on the sales of advanced semiconductors in China would derail Nvidia’s rapid revenue growth as well as the outlook for artificial intelligence spending, and the firm’s ability to expand supply of its newest Blackwell chips.
“Those questions have been answered in the positive for Nvidia,” said Thomas Martin, senior portfolio manager at Globalt Investments. “It’s time to ramp back up your ownership.”
After soaring for two and a half years amid insatiable demand for its chips used in AI computing, Nvidia shares tumbled in the first few months of 2025 on concerns about President Donald Trump’s trade policies and a potential pullback in spending by its biggest customers.
Nvidia rose 0.9% on Tuesday, and since an April low, the stock has rallied more than 45%, pushing Nvidia’s market value to $3.4 trillion. That’s just shy of Microsoft Corp., the world’s most valuable company. Nvidia shares remain 7% below a record high in January.
Despite the big advance, Nvidia trades at roughly 29 times profits projected over the next 12 months, well below the average over the past decade at 34 times. By contrast, the Nasdaq 100 is priced at 26 times despite Wall Street estimates calling for revenue growth this year that’s a fraction of Nvidia’s. The stock’s PEG ratio — a measure of valuation relative to growth — is under 0.9, by far the lowest among the Magnificent Seven, which also includes Apple Inc., Amazon.com Inc., Alphabet Inc., Tesla Inc. and Meta Platforms Inc.
Of course, Nvidia is still exposed to US tariffs given its chips are manufactured overseas and could be hurt by a deterioration in trade relations with China, a country that accounted for 13% of revenue in the first quarter. However, purchase agreements with governments in the Middle East are seen as offsetting some lost sales and Nvidia’s product pipeline is expected to keep competitors at bay.
Microsoft, Meta, Alphabet, and Amazon, which together comprise more than 40% of Nvidia’s revenue, continue to invest aggressively in AI infrastructure. Capital expenditures for the four companies are projected to reach roughly $330 billion in 2026, up 6% from estimated spending this year, according to the average of analyst estimates compiled by Bloomberg. Amazon’s cloud services chief on Friday reiterated the company’s plan to aggressively expand its data centers.
“We just haven’t seen any kind of slowdown in AI spending, and so long as capex keeps moving up, we’re unlikely to see the cycle roll over or Nvidia experience much compression to its multiple,” said Samuel Rines, a macro strategist at WisdomTree.
Nvidia is undervalued, according to Rines, who argues the ratio of price-to-projected earnings for the stock could rise to the high 30s or low 40s.
Analysts are widely bullish on Nvidia. Of the 78 covering the stock, eight have hold ratings and only one says sell. The average price target sits at around $170, which would represent a gain of 24% from Monday’s closing price, according to data compiled by Bloomberg.
Explainer: Why Is Nvidia the King of AI Chips, and Can It Last?
Despite its popularity on Wall Street, the stock remains under-owned by market professionals relative to other Big Tech peers, suggesting the potential for more buying in the weeks to come. Nvidia is owned by 74% of long-only funds, according to data from Bank of America published on Friday. This puts it behind Amazon, Apple, and Microsoft, which is the most owned at 91%.
The relatively low exposure coupled with demand for more computing infrastructure is likely to drive Nvidia shares higher into 2026, according to Angelo Zino, senior equity analyst at CFRA Research.
“There were a lot of investors that really got out of this market prematurely and now they’re kind of being forced back into it,” Zino said.
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Microsoft has roared back in recent weeks, cementing its position as the world’s most valuable company. Shares of the Windows software maker are also inching toward an all-time high as the stock extends gains since the company reported stronger-than-expected sales and profit growth in the fiscal third quarter.
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