Surprise: Nvidia now fits the profile of a growth-at-a-reasonable-price stock. The company emerged as the biggest AI beneficiary in 2023; as demand for its chips exploded, so did its stock price. Although Nvidia has continued to deliver strong earnings growth this year, its valuation has become more reasonable relative to our growth projections and fair value estimate. Given the high likelihood of strong AI capital expenditures in the near term and medium term (and likely the long term too), we believe Nvidia’s growth prospects are underrated. The stock looks like a bargain, trading 30% below our $280 fair value estimate. Nvidia was one of Morningstar Chief US Market Strategist Dave Sekera’s picks on a recent episode of The Morning Filter podcast, 5 Stocks to Buy While They’re Still Reasonably Priced.
Nvidia provides the graphics processing units, hardware, software, and networking tools needed to enable the exponentially growing market around artificial intelligence. In the long run, we expect tech titans to strive to find second sources or in-house solutions to diversify away from the company, but these efforts will at best only chip away at Nvidia’s AI dominance. We expect leading cloud vendors to continue to invest in their own solutions; also, AMD is working on GPUs and AI accelerators for data centers. However, we view Nvidia’s GPUs and Cuda platform as the industry leaders.
Key Morningstar Metrics for Nvidia
- : $280
- : 4 Stars
- : Wide
- : Very High
Economic Moat Rating
We think Nvidia has a wide economic moat based on intangible assets around its graphics processing units and high customer switching costs around its proprietary software. GPUs perform parallel processing, as opposed to serial processing, which we think is at the heart of Nvidia’s dominance. Although GPUs were initially used for more robust and immersive gaming, their parallel processing was also found to more efficiently run the matrix multiplication algorithms needed to power AI models. Nvidia’s Cuda software platform creates and hosts the libraries, compilers, frameworks, and development tools that allow AI professionals to build their models, and it only runs on Nvidia GPUs. We believe this integration has created high customer switching costs.
Read more about Nvidia’s moat rating.
Fair Value Estimate for Nvidia Stock
Our $280 fair value estimate implies price/adjusted earnings multiples of 30 times for fiscal 2027 and 20 times for fiscal 2028. Given the acceleration in AI capital spending we expect for the industry in calendar 2026, we model 80% total revenue growth for Nvidia in fiscal 2027. This will represent a peak, since it will be harder for Nvidia to achieve such high growth as its revenue base expands, but we still anticipate robust growth in the years ahead. We expect Nvidia to achieve mid-70s gross margins in fiscal 2027. We anticipate modest gross margin deterioration to the high 60s a decade from now. We think GAAP operating margins will hover in the high 50s to the mid-60s in each year of our 10-year forecast, depending on the pace of research and development spending.
Read more about Nvidia’s fair value estimate.
Risk and Uncertainty
In our view, Nvidia’s valuation will be tied to its ability to grow within AI, for better or worse. We see the biggest risk as the pace of AI spending going forward. This spending comes from a handful of customers, and they all have an incentive to eventually optimize, if not reduce, their investments. We also think that tech leaders will turn to in-house chips for at least a portion of their workloads. In addition, we foresee geopolitical risk and uncertainty, most notably with US restrictions that have at various times prevented Nvidia from selling its AI products into China.
Read more about Nvidia’s risk and uncertainty.
Nvidia Bulls Say
- Nvidia foresees $3 trillion-$4 trillion of annual AI infrastructure spending by 2030.
- Nvidia’s data center GPUs and Cuda software platform have established the company as the dominant vendor for AI model training and inference.
- Nvidia is expanding nicely in AI. It’s supplying industry-leading GPUs but also moving into networking, software, and services to tie these GPUs into even more powerful clusters.
Nvidia Bears Say
- Nvidia’s customers are a handful of the largest tech companies in the world, and they all have an incentive to eventually diversify away from Nvidia to some extent.
- AI infrastructure spending has been impressive, but revenue and use cases are less certain. This could cast doubt upon whether there is a good return on investment with AI, possibly leading to a spending downturn at some point.
- Geopolitics have entered the AI space, most notably limiting Nvidia’s AI opportunities in China.
This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of July 28, 2026, close unless otherwise noted.