Nvidia (NVDA +5.93%) blasted to a new all-time high on April 27. As of mid-afternoon April 29, the stock was up by about 12% year to date -- outperforming the technology sector and the Nasdaq Composite, which was up by about 7%.
Nvidia's market cap first surpassed $5 trillion in November, but fell below that level in lockstep with a broad-market sell-off. Now, it is back above that threshold. Assuming it keeps its share count steady and doesn't engage in any stock splits, a stock price of $246.85 would correspond with Nvidia becoming the inaugural member of the $6 trillion club.
Here's why Nvidia is still a good value even near its all-time high.
Image source: Getty Images.
Why Nvidia lost ground over the winter
Less than two months ago, Nvidia was trading at a lower forward price-to-earnings ratio than the S&P 500 as investors scrutinized the tech sector's record spending on artificial intelligence (AI).
The company's growth is largely dependent on infrastructure investment in data centers. Building hyperscale data centers is capital-intensive, and the process is exposed to myriad supply chain bottlenecks -- namely, shortages of chips, networking equipment, electricity, and specialized industrial machinery. Nvidia can't simply flip a switch and produce more chips when demand rises, in part because it outsources its manufacturing to foundry partners like Taiwan Semiconductor Manufacturing. Moreover, it takes considerable time and money to bring a new chip foundry online. And Nvidia's next-generation chips require the most advanced manufacturing processes, which in turn require the latest semiconductor equipment and fabrication methods.
The rapid build-out of hyperscale data centers involves many factors beyond Nvidia's control. And that uncertainty, paired with its unprecedented increase in market cap and profits, gave investors pause.
NASDAQ: NVDA
Key Data Points
Unrelenting AI spending
Nvidia's massive rebound over the last month or two has had little to do with its latest results; the market barely reacted to its impeccable Feb. 25 earnings report or its forecast for $1 trillion in AI chip orders in 2026 and 2027 -- a prediction its CEO made at the company's GTC 2026 event on March 16. Rather, the recovery was largely driven by investor sentiment. And it's a good reminder that being a long-term investor requires committing to your investment thesis even when the market isn't seeing it.
Investor sentiment toward the AI sector is improving as blockbuster deals continue to close despite macroeconomic concerns. In the last month alone, Alphabet and Broadcom have expanded their partnership for networking and AI chip designs, including a major deal with Anthropic -- maker of the Claude large language models. Meta Platforms and Anthropic are boosting their commitments to Amazon Web Services -- including using its custom chips for AI workloads. These deals don't directly involve Nvidia, but they show that hyperscalers' spending remains strong, which benefits Nvidia.
Nvidia's longer-term opportunities
The chipmaker's data center opportunity alone makes it a buy. But what gives Nvidia the ultra-rare "generational buying opportunity" status is the potential of its end markets beyond data centers.
Management just announced a new AI model to improve the accuracy of quantum computers -- building on its existing portfolio of hardware and software solutions for quantum computing.
Physical AI offers yet another game-changing opportunity. Today, that business provides less than 3% of Nvidia's revenue. But it could soon play a much larger role as self-driving cars, warehouse automation, and robotics advance.
A top-tier AI stock to build a portfolio around
At just 25 times forward earnings, Nvidia is still a great bargain for long-term investors who believe AI spending will be more than just a short-lived cyclical boom and that Nvidia will be able to monetize AI beyond the data center market.
However, Nvidia could undergo a steep sell-off if there's a pullback in AI spending, so investors should only approach the stock if they have investment time horizons of at least three to five years.
