Nvidia (NVDA) is currently one of the most exciting companies in the world. However, the stock recently became overvalued due to the excitement surrounding AI and data center expansion. In the past month, the stock has declined about 18% (and is down 25% from its all-time high), which I believe brings it back to a fair valuation for now. Therefore, I am moderately bullish on NVDA for the long term, although I think the price could contract further in the short term.
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NVDA’s Overvaluation Concerns and Future Fair Value Outlook
NVDA’s recent price correction can be traced back to the factors that initially led to its overvaluation, driven by excitement around AI and data center expansion. Wall Street’s consensus estimate for NVDA’s EPS growth for Fiscal 2025 is 110%. However, this rate drops to 38% for Fiscal 2026 and 14% for Fiscal 2027. This diminishing growth outlook suggests that the bullish sentiment around NVDA stock may not be sustainable, especially given the stock’s high P/E ratio of 61x and P/S ratio of nearly 33x.
Given these declining growth rates, it seems likely that NVDA stock may continue to fall in value in the short term. Nevertheless, the stock now appears fairly valued, and any further decline from the current price could present a buying opportunity based on potential undervaluation.
I have set a 12-month price target of $150 for NVDA stock, which I consider fair value based on future fundamental growth rate estimates and anticipated valuation multiple contraction. Despite this, there is a significant chance of sentiment remaining bearish through Fiscal 2025, despite strong earnings growth projected for Fiscal 2026. If Nvidia has a P/E ratio of 40 this time next year, the stock would be worth approximately $150 based on the Wall Street consensus that EPS for Fiscal 2026 will be $3.76, assuming the market prices this in five months early. NVDA’s current forward P/E ratio is 40, which is why I consider $150 fair value on a TTM basis for the next 12 months.
Additionally, Nvidia’s CEO, Jensen Huang, sold $500 million worth of Nvidia shares between June and early August 2024, including $322.7 million worth of shares in July alone. This suggests he believed the market had temporarily overvalued NVDA.
Nvidia’s Future: Robotics and Automation
Nvidia is already looking beyond AI and data centers, with a strong focus on robotics and automation as the next growth drivers.
The company recently announced Project GR00T, a foundation model for humanoid robots. Additionally, it has developed Jetson Thor, a new computing platform for humanoid robots. Technologies like these represent the areas where Mr. Huang says Nvidia is focusing its efforts moving forward. This focus is critical as the initial euphoria surrounding AI begins to wane, with robotics likely being the next big growth story.
Furthermore, Nvidia has developed its Isaac robotics platform, which includes tools for simulation and AI workflow infrastructure. For example, its Isaac Lab is designed for running parallel simulations to aid robot learning.
The Isaac robotics platform is already being adopted by over 100 companies, indicating strong market demand. Jensen Huang has mentioned that “everything that moves will one day be autonomous,” and Nvidia plans to play a foundational role in facilitating this. As a result, the future growth outlook for the stock remains robust.
Nvidia’s Explosive Growth Faces New Challenges
Nvidia’s explosive growth has been remarkable, but it now faces new challenges that could impact its momentum. Nvidia has delivered massive growth in Fiscal 2024, reporting 208% year-over-year revenue growth and 586% year-over-year GAAP EPS growth. However, as I outlined, the contractions in growth are real and have already begun. Therefore, even with the future strategy focused on robotics and automation, it is unlikely that NVDA will experience the same level of growth it has seen over the past two years ever again.
The AI and data center markets are now beginning to mature. Additionally, the AI chip market, which is still expanding, is becoming increasingly competitive as companies like Advanced Micro Devices (AMD), Intel (INTC), and smaller entrants like Groq and Cerebras position themselves. This could erode Nvidia’s market share and pricing power.
Also, as I mentioned, despite my belief that Nvidia is now fairly valued, the market might not agree. We’ve been accustomed to bullish sentiment surrounding the company’s massive fundamental growth rates for so long. However, as these begin to contract, the market might sell off based on herd psychology rather than actual revenue and earnings growth. That’s why I think some more downward momentum is due, but it will present even more of a buying opportunity.
Is Nvidia Stock a Buy, According to Analysts?
Turning to Wall Street, Nvidia is rated as a Strong Buy based on 37 Buy ratings and four Hold ratings from analysts. The average NVDA stock price target of $144.17 suggests a 37.3% upside potential. While this outlook is very positive, retail investors—who are now heavily invested in Nvidia—could be the primary reason the stock might become undervalued if it falls further in price over the next year.
Despite this, I agree with the Wall Street consensus that Nvidia still has room to rise.
The Takeaway: Nvidia Remains a Top Growth Stock
In my opinion, Nvidia is much more fairly valued after the recent 25% correction in price. I had anticipated this valuation for the second half of 2025, but it appears to have arrived early. That being said, the stock could continue to decline over the next few quarters. If it does, I will be looking to buy a large stake in NVDA, as I believe the long-term growth prospects remain intact amid trends in robotics and automation.
Based on my analysis, NVDA could reach a stock price of approximately $150 in 12 months. This suggests that the growth story for NVDA is far from over, and the autonomous revolution, with Nvidia at its epicenter, is still in its nascent stages. As a result, NVDA could be a Buy.
