Nvidia closes above $5 trillion – should you buy shares?
Are Nvidia’s shares good value or is the chip giant too expensive to buy?
Shares in Nvidia, the world’s most valuable company, closed 24 April at a share price of $208.26 – giving Nvidia’s stock a market capitalisation of $5.06 trillion.
Frequently one of the most popular stocks ever since the rise of artificial intelligence (AI) and the emergence of the ‘Magnificent 7’ group of perceived beneficiaries, Nvidia has become the first company in the world to achieve a market value first of $4 trillion, then of $5 trillion, within the last year.
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Nvidia’s stock has nearly doubled in value over the last 12 months.
But should you buy Nvidia’s shares, especially now they are more expensive than they’ve ever been?
“Nvidia at $5 trillion is a market milestone that demands attention, but the more important question is what happens next,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “At moments like this, investors can spend too much time looking in the rear-view mirror and not enough time assessing where earnings power is heading.”
Is Nvidia generating earnings growth?
The AI boom led to a rapid increase in Nvidia’s profitability, transforming it from mostly a gaming chip designer to the dominant player in hardware for AI – itself the most influential force in the stock market since the launch of ChatGPT in November 2022.
Nvidia’s net income increased from $4.4 billion in its 2023 financial year (which ended in January 2023) to $120.1 billion in the most recent one (ending January 2026).
That kind of earnings growth is very rare, especially for a company of the size of Nvidia.
Analysis released in April by market data provider FactSet suggests that Nvidia alone is keeping the Mag 7 stocks ahead of the rest of the S&P 500 in terms of average earnings growth.
Analysts polled by London Stock Exchange Group expect Nvidia to generate earnings per share of $8.28 during this financial year, which would represent a 73.6% increase from the previous year if accurate. This would represent very healthy earnings growth, as long as it materialises and, crucially, is sustainable.
Can Nvidia keep increasing its earnings?
At present, Nvidia is benefitting from its position as the leading designer of AI chips and the proliferation of AI products across life and business.
There are, though, several potential risks that this position faces.
Firstly, it assumes that AI will continue to grow at pace. That looks likely as things stand, but some AI companies might not end up being profitable, so demand for chips could fall. Large customers of Nvidia’s products – especially Mag 7 ‘hyperscalers’ like Alphabet or Meta – are spending heavily on its chips at present, but if this spending slows down for any reason, it could hurt Nvidia’s future growth.
More likely than either of these scenarios is that other companies develop alternative chips that can competently compete with Nvidia’s. This is already happening; Broadcom is seen by many as a clear direct rival for Nvidia, and even some of its own customers – like Alphabet – are developing their own chips for use in AI products.
Nvidia’s huge profit margins reflect the fact that, at present, it has almost complete pricing power, but if viable alternatives emerge that could change quickly.
Are Nvidia’s shares good value?
Nvidia’s shares currently trade at around 26 times its expected earnings, as of 24 April. That is a little higher than the average for the S&P 500 index (22), but not by a lot.
“[Nvidia’s] earnings multiple still looks relatively modest given the scale of the growth on offer,” said Britzman.
“Demand signals across AI infrastructure remain strong… and the sheer weight of free cash flow coming through this year continues to strengthen the investment case.”
With a stock like Nvidia, given how much focus and attention it receives, there is always the risk of volatility, so you will need to decide how much risk you are willing to take and where it fits in your investment strategy before buying Nvidia stock.
However, despite having the highest face value they’ve ever seen, Nvidia’s shares have a much more reasonable trailing price/earnings ratio now than they did two years ago, when they traded at over 50 times earnings over the last year (compared to around 43 today).
