Think Nvidia Is Expensive? These 3 Charts Might Change Your Mind.

Core Viewpoint - Nvidia's stock has experienced a remarkable increase of nearly 1,500% over the past five years, positioning it as one of the most valuable companies globally, yet it remains attractive for long-term investors [1] Valuation Analysis - On a price-to-sales basis, Nvidia shares appear expensive, trading at 21 times sales with a market cap around $3 trillion, a high premium for a company of this size [2] - However, when evaluated on a price-to-earnings basis, Nvidia's shares are not as overvalued, emphasizing the importance of profits over sales for shareholder returns [2] - Currently, the S&P 500 trades at 28 times earnings, while Nvidia trades at a 35% premium to the overall market, which is reasonable given its profitability and position in the rapidly growing AI sector [4] - Nvidia's sales are growing at over 50% annually, leading to a forward price-to-earnings ratio of 25, compared to the S&P 500's forward ratio of around 20, indicating a 25% premium on a forward basis [4] Future Outlook - Nvidia's rapid growth is expected to reduce its valuation premium significantly over the next 12 months, with the potential for shares to trade at a discount to the market based on current prices in the future [6] - The ongoing demand for AI is likely to contribute to this reduction in premium for many years, suggesting that Nvidia is not overvalued from an earnings perspective [6]