Nvidia's stock valuation has dropped to levels not seen since 2019, despite the company's explosive growth in the artificial intelligence chip market. The company's price-to-earnings ratio, a key metric investors use to gauge whether a stock is cheap or expensive, recently fell to 30.09, well below its seven-year average of 71.2. This discount comes at a critical moment: Nvidia is preparing to launch its most powerful hardware platform yet, which could reshape the economics of AI development for companies like OpenAI and Anthropic.

What's Driving Nvidia's Valuation Discount?

The gap between Nvidia's current valuation and its historical average suggests the market may be underpricing the company's near-term prospects. Even though Nvidia's revenue grew 65% in fiscal year 2026, reaching $215.9 billion, and its data center business surged 68% to $193.7 billion, investors have become more cautious about the company's stock price. This creates an unusual situation: a company experiencing explosive growth is trading at a discount to its long-term average valuation.

The disconnect partly reflects broader market concerns about whether the artificial intelligence boom can sustain its current pace. However, Nvidia's upcoming product launches suggest the company is far from slowing down. During a May investor call, CEO Jensen Huang outlined plans for a new system called Vera Rubin, which represents a significant leap forward in AI chip performance and efficiency.

"Every frontier AI company intends to adopt Vera Rubin at launch," Huang stated during a conference call with investors on May 20, noting that this level of adoption was not true for the Blackwell platform.

Jensen Huang, CEO at Nvidia

How Will Vera Rubin Change the AI Chip Market?

Vera Rubin is scheduled to ship in the second half of 2026 and includes three main components: the Rubin GPU (graphics processing unit), the Vera CPU (central processing unit), and updated networking components. The system's performance improvements are dramatic. According to Nvidia, developers can train artificial intelligence models using 75% fewer GPUs compared to Blackwell, the company's current flagship platform. Additionally, Vera Rubin can reduce inference token costs by up to 90%, making it substantially cheaper to run AI applications once they're deployed.

Inference tokens are the text, images, and symbols that an AI model generates in response to a user's question. When companies like OpenAI run ChatGPT or similar services, they pay for every token generated. A 90% reduction in token costs would dramatically improve profitability for AI service providers, potentially driving even more demand for Nvidia's chips as companies rush to upgrade their infrastructure.

The efficiency gains matter because they address one of the biggest pain points in AI deployment: cost. As AI models become more capable, they also become more expensive to run. Vera Rubin flips that equation by making powerful models cheaper to operate, which could accelerate adoption across industries.

Why Investors Should Watch Nvidia's Growth Trajectory

Nvidia's recent financial performance shows the momentum behind AI infrastructure spending. In the first quarter of fiscal 2027, which ended April 26, the company generated $81.6 billion in total revenue and $75.2 billion in data center revenue. These figures represent year-over-year increases of 85% and 92%, respectively, demonstrating that demand for AI chips continues to accelerate rather than plateau.

Wall Street analysts expect Nvidia's earnings to grow even faster. The company's generally accepted accounting principles (GAAP) earnings are projected to soar 91% to $9.36 per share during fiscal 2027. This explosive earnings growth is crucial because it affects how investors value the stock. When a company's earnings grow faster than its stock price, the valuation becomes more attractive.

Consider the forward price-to-earnings ratio, which uses projected future earnings rather than historical ones. Nvidia's forward P/E ratio is just 21.5, meaning investors are paying $21.50 for every dollar of projected earnings. For context, the Nasdaq-100 index, which contains high-growth technology companies, trades at a P/E ratio of 34.4, while the broader S&P 500 trades at 25.2. By this measure, Nvidia looks significantly cheaper than both the broader market and its technology peers.

Steps to Understanding Nvidia's Investment Case

• Current Valuation: Nvidia's P/E ratio of 30.09 is the lowest since 2019, representing a substantial discount to its seven-year average of 71.2, suggesting the stock may be undervalued relative to its growth prospects.
• Upcoming Product Launch: Vera Rubin, shipping in the second half of 2026, promises to reduce GPU requirements by 75% and inference costs by 90%, potentially driving a new wave of AI infrastructure spending and adoption.
• Earnings Growth Acceleration: Wall Street expects Nvidia's earnings to grow 91% in fiscal 2027, with data center revenue projected to grow 92% year-over-year, indicating sustained momentum in AI chip demand.
• Market Adoption Signals: CEO Jensen Huang stated that every frontier AI company plans to adopt Vera Rubin at launch, a level of commitment that exceeds adoption rates for the previous Blackwell generation.

The combination of a low valuation, accelerating earnings growth, and a transformative new product launch creates what some investors view as a compelling opportunity. Nvidia's stock would need to more than double just to reach its historical average P/E ratio, yet even at double the current price, the forward P/E would remain below 43, still below the company's long-term average. For investors betting on continued AI infrastructure spending, the timing of this valuation discount relative to Vera Rubin's launch may prove significant.

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