Nvidia shares continue to trade below the $200 mark, even as the stock's valuation hits its lowest level in more than a decade. The chipmaker's forward price-to-earnings ratio closed Monday at 18.16, a level not seen since April 2015, according to Dow Jones Market Data. Investors are weighing concerns over AI financing against expectations of sustained demand for artificial intelligence computing.
Valuation improves amid new risks
The recent pullback follows a 5% decline on Monday, which knocked Nvidia from its position as the world's most valuable publicly traded company, ceding that spot to Apple. The broader semiconductor sector also came under pressure after reports emerged that a Chinese company had begun mass-producing key chipmaking equipment, reigniting concerns about supply chain dynamics.
Adding to the uncertainty, a Wall Street Journal report indicated that Nvidia is discussing a roughly $250 billion financing guarantee for OpenAI to support a large data center project in Ohio. While the arrangement would help OpenAI secure more favorable financing terms and bolster long-term demand for Nvidia's AI chips, some investors have drawn parallels to the circular investment structures seen during the dot-com era. For more context on this development, see our analysis of the OpenAI guarantee.
Morningstar backs long-term outlook
Morningstar, the research firm, has pushed back against those concerns, maintaining its $280 fair value estimate for Nvidia. That target implies roughly 40% upside from current levels. The firm said it does not believe the reported financing discussions undermine the long-term investment case for the company.
“Demand for AI computing continues to expand rapidly, with hosting providers constrained by available capacity rather than customer demand,” Morningstar noted. The firm also pointed to AMD's recent upward revision of its server CPU market forecast as evidence that demand for agentic AI is strengthening, supporting the need for additional infrastructure over the coming years.
Morningstar added that Nvidia already provides financing backstops to some cloud infrastructure providers in exchange for a share of future AI hosting revenue. A similar arrangement with OpenAI would be much larger but consistent with Nvidia's broader strategy of expanding the AI ecosystem and securing long-term demand for its hardware.
Big Tech earnings in focus
Investor attention is now shifting to quarterly results from major technology companies, which are expected to provide fresh insight into the pace of AI investment. Microsoft, Meta Platforms, and Amazon are scheduled to report earnings this week, with markets closely watching capital expenditure guidance as a proxy for future demand for Nvidia's processors.
Beyond overall spending levels, analysts will also look for commentary on the types of AI hardware companies plan to deploy. Several large tech firms have increasingly developed custom processors with partners such as Broadcom for specific workloads. While those chips are designed to complement rather than fully replace Nvidia's GPUs, investors remain alert to whether greater adoption of custom silicon could gradually reduce reliance on third-party suppliers. For a broader view of the sector's recent moves, see our coverage of the chip stock selloff.
As the market digests these developments, Nvidia's valuation remains a key talking point. The stock's current multiple is well below its historical average, and analysts see a potential catalyst in the upcoming earnings reports. However, the path forward may depend on how investors interpret the interplay between AI financing structures and the long-term demand trajectory for Nvidia's technology.
This article is for informational purposes only and does not constitute financial advice.
