With the Nasdaq Composite in bear market territory, many stocks look like absolute bargains compared to their previous values. One of those stocks is Nvidia (NVDA +2.59%), which has been practically the No. 1 stock to own in the market since 2023.
With the stock down around 35% from its all-time high, many investors are likely wondering if buying Nvidia today could be the deal of a lifetime and give them fantastic returns and help set them up for life. Is this true? Or is Nvidia a value trap here?
The AI race isn't slowing down
Nvidia has been the top stock in the market due to its integral role in the AI race. Nvidia makes graphics processing units (GPUs), the computing muscle behind many of the AI models we see today. GPUs can perform multiple calculations simultaneously, which is further amplified when hundreds or thousands of GPUs are connected in clusters. This gives users access to jaw-dropping computing ability, which is needed to train cutting-edge generative AI models.
NASDAQ: NVDA
Key Data Points
Nvidia's stock has gotten hit because the market has assumed that Nvidia's largest clients (the AI hyperscalers) will scale back their data center buildouts due to fears of an impending recession (or at least a slowdown) caused by President Donald Trump's tariff plan.
While I think there are some valid concerns with that argument, the AI race is too important a race to win, and these AI hyperscalers have unbelievable cash flows that can fund these investments even if their core business struggles a bit. As a result, I think the Nvidia growth story is still mostly intact, which means today's prices are absolute bargains compared to what investors have had to pay over the past few months.
Nvidia's projected growth is massive
Another reason why I think Nvidia is a buy today is its build-out projections. During Nvidia's 2025 GTC event, CEO Jensen Huang gave the bold prediction that data center capital expenditures will reach $1 trillion by 2028. Considering that 2024 saw around $400 billion in capital expenditures and that Nvidia generated $130 billion over the past 12 months, this bodes well for stock growth. Should Nvidia maintain its current slice of the data center capital expenditure pie, it would generate around $325 billion in revenue from data centers alone by 2028. That's monstrous growth from today's levels and would make investors a lot of money.
But let's be a bit more conservative here and say that Nvidia will only add half of that growth over the next four years, indicating it would generate $228 billion. Moving forward, having a bit of pessimism is a smart play because there are other competitors coming to the market who are aiming for Nvidia's market share. Custom AI accelerators are the primary hardware that could steal this market share from Nvidia, as they are more powerful than GPUs when the workload is configured properly. Furthermore, data center buildouts could be less than expected, and the $1 trillion figure may not surface.
Even with this conservative growth estimate, Nvidia's stock looks like a great buy here. If Nvidia generated $228 billion in revenue at the end of 2028 and maintained its profit margins, it would generate $127 billion in profits.
Nvidia's stock valuation has come down significantly over the past few months, but even over the long term, it's not uncommon to see the shares trade for a high valuation. So, we'll assume that Nvidia's price-to-earnings (P/E) multiple at the end of this analysis will be 30.
NVDA PE Ratio data by YCharts.
If Nvidia's P/E multiple is 30 and it generates $127 billion in profits, the company would be worth $3.81 trillion by the end of 2028. Considering that Nvidia is worth $2.38 trillion today, that would indicate that Nvidia's stock has around 60% upside from today's prices.
Remember, that's with the conservative estimate. As a result, I think that Nvidia is an excellent stock to buy right now, as its future growth isn't priced in. However, I don't think it's going to provide the jaw-dropping returns that it has in the past, so it may not fall into the "could set you up for life" category.
