Could Nvidia Be the Most Undervalued Stock in AI Right Now and Be Ready to Soar in 2026?

Core Viewpoint - Nvidia is considered one of the most undervalued AI stocks despite its high trailing price-to-earnings (P/E) ratio, with strong growth prospects and significant cash reserves [1][2][3]. Financial Metrics - Nvidia's trailing P/E is approximately 45.5 times, but its forward P/E for 2026 is projected to be below 25 times, with a price/earnings-to-growth (PEG) ratio under 0.7, indicating undervaluation [2]. - The company holds around $52 billion in net cash and securities, and is expected to generate about $85 billion in free cash flow this year [3]. - For fiscal Q4, Nvidia forecasts a revenue increase of 65% year over year, reaching $65 billion [5]. Growth Potential - Nvidia's revenue grew by 62% year over year last quarter, and it has seen nearly a tenfold increase in revenue over the past two years [4]. - The company is well-positioned to benefit from a projected $4 trillion in data center capital expenditure by the end of the decade [7]. - Major cloud computing companies are expected to spend aggressively on data infrastructure, further supporting Nvidia's growth [5]. Market Position - Nvidia commands over 90% market share in the data center GPU space, benefiting from a robust ecosystem built around its chips [11]. - The company has developed the CUDA software platform, which has become the standard for AI code, enhancing its competitive edge [9][10]. Future Projections - Revenue projections for Nvidia indicate significant growth, with estimates reaching $213 billion in FY2026 and $876 billion by FY2030 [12]. - Adjusted earnings per share (EPS) are expected to rise from $4.70 in FY2026 to $20.22 in FY2030, reflecting strong profitability potential [12].