Remember when Nvidia (NASDAQ:NVDA) stock was all the rage? It only seems like yesterday that investors couldn’t get enough of the AI chip king, sending its share price higher almost every day.
Recently, however, it has meandered while memory chip stocks have rocketed. And after falling 13.5% since May, Nvidia is currently at the same level it was back in October 2025.
It’s even slightly underperformed the S&P 500 year to date.
What’s up with Nvidia stock? And can it get back to winning ways over the next 12 months?
Old hat
As for what’s ailing Nvidia, there appear to be a couple of things. The first is that money has moved out of names that have generated strong returns in previous years (like Nvidia) and into areas like memory chip stocks.
In this part of the market, profits are absolutely skyrocketing as demand outstrips supply. Earlier this week, Samsung Electronics said it expects quarterly profits to explode 1,800% higher!
Money also piled into SpaceX for its record-breaking IPO, and Anthropic and OpenAI are also going public in the coming months. With eye-popping profits appearing elsewhere and shiny new AI stocks coming to market, Nvidia has almost become old hat!
On top of this, there are concerns that Nvidia’s key customers are building out their own specialised AI chips. Amazon, for example, has big plans to sell its custom AI chip server racks directly to third-party data centres.
Is Wall Street still bullish?
The memory chip shortage is clearly not ideal for Nvidia. Will paying more eat into its spectacular 75% gross margin? Will there be delays shipping its next-generation products? These are near-term risks.
On the other hand, the stock looks too cheap to me. Based on forecasts for FY28 (starting in February), it’s trading at just 16 times forward earnings. That’s lower than the S&P 500 and the cheapest it has been in years.
The five-year price/earnings-to-growth (PEG) ratio, which measures the current share price relative to future earnings growth, is just 0.6, according to Yahoo Finance. Anything less than 1.0 is generally considered undervalued.
Admittedly, we can’t be certain what Nvidia’s earnings will be in five years’ time, so the PEG ratio isn’t perfect. But it does suggest the stock is undervalued right now.
Wall Street analysts agree, with the average price target at $313 — some 53% higher. The stock may never reach this target, of course, but if it does then £5,000 invested today could become roughly £7,500 by next summer.
Should I buy?
Despite rising competition, Nvidia’s gold-standard chips remain central to the AI infrastructure buildout. Speaking of which, CEO Jensen Huang estimates there will be $3trn-$4trn of annual AI infrastructure spending by 2030.
While the tech giants’ spending on data centres will inevitably slow in future years, there’s an enormous adjacent market emerging. That’s physical AI, which includes self-driving vehicles and humanoid robots.
Nvidia has had its eye on the physical AI opportunity for some time, building out the software and hardware ecosystems to capture this opportunity. It’s also positioning itself so that most quantum computers can one day run on Nvidia software.
I already have a decent-sized holding, but I’m tempted to buy more Nvidia shares this month. I think it’s a buying opportunity worth considering around $200.
Should you invest £5,000 in Nvidia right now?
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Ben McPoland owns shares in Nvidia.
