Nvidia Valuation Hits Entry Point, Bernstein: Cycle Just Beginning

TradingKey - Since the start of 2025, shares of AI chip leader Nvidia (NVDA.US) have fallen 14%. Despite lingering market concerns over challenges from China’s DeepSeek and U.S. political-economic dynamics, Bernstein identifies a fresh buying opportunity based on valuation metrics.

In a recent report, the prominent research firm highlighted Nvidia’s stock as particularly attractive following recent sell-offs. 

Year-to-date, Nvidia has faced multiple headwinds: competition from China’s DeepSeek impacting chip demand expectations, weaker-than-expected gross margin guidance, subdued U.S. growth prospects, and broader market unease tied to Trump-era policy risks.

Nvidia shares currently trade at $115.99, down 13.63% YTD, compared to the S&P 500’s 1.76% decline. Bernstein cites two valuation-driven reasons for the stock’s appeal:

1. Relative Valuation Discount: Nvidia’s premium over the S&P 500 has narrowed to its lowest level since 2016. It also trades below parity versus the PHLX Semiconductor Index SOX, which has only happened one or two times in the last 10 years.
2. Compelling P/E Multiple: At 25x earnings, Nvidia’s valuation sits at a one-year low and near decade-long lows. Historically, buying at this multiple has delivered strong returns.

Bernstein finds the valuation reset surprising given Nvidia’s early-stage product cycle momentum. While initial issues arose with its Blackwell chips, these now appear resolved. The company confirmed to Bernstein that supply-demand imbalances will persist in coming quarters amid robust demand.

Despite ongoing U.S.-China export control risks, Bernstein thinks "worries that the AI trade is 'over' feel a little premature to us," maintaining an Outperform rating with a $185 price target.