Think Nvidia stock is expensive? These 2 charts might change your mind.

Is now the time to buy Nvidia stock?

| More on:
A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

  • Nvidia's relatively high price-to-sales (P/S) ratio has proven to be justified.

  • Data center revenue is still climbing.

  • Nvidia also has multiple growth opportunities in another segment.

Last month, Nvidia (NASDAQ: NVDA) became the first company to be valued at more than $4 trillion, as artificial intelligence (AI) has become the future of technology. The stock is trading a tiny bit under its recent record high on Thursday morning, and investors may be wondering if the stock is too expensive to buy. A look at how Nvidia became the AI leader might give investors more comfort in buying shares now.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

It started with data center GPU sales

Nvidia stock does look relatively expensive right now. Its price-to-sales (P/S) ratio based on expected 2025 revenue is about 21.5. That's above its three-year average of 18.5, which itself is very high. But an elevated P/S valuation has thus far proven justified. That's because sales have soared exponentially, led by Nvidia's data center segment.

Line graph showing Nvidia's quarterly data center revenue soaring.

Data source: Nvidia. Chart by author.

Nvidia's stock price has risen along with those sales, and there looks to be more room to run for both. Data center sales continue to increase every quarter, and the company's next-generation graphics processing unit (GPU) Rubin architecture is slated for release in 2026.

What's next beyond data centers

Nvidia has growth potential beyond data centers, too. Revenue from its automotive and robotics segment is also growing quickly, as shown below. It could have a longer runway for growth, too.

line graph showing quarterly revenue for Nvidia's auto and robotics segment.

Data source: Nvidia. Chart by author.

Companies around the world are working to make driverless cars a reality. There could be a massive market for self-driving ridesharing and taxi services. Nvidia is partnering with legacy automakers as well as start-ups like autonomous driving company Nuro to advance AI-driven autonomous vehicles.

Beyond automotive applications, robotics could also become a large market as companies seek more efficient and safer ways to operate. Nvidia's future looks bright. The stock may look expensive now, but that can quickly change as the business soars.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Howard Smith has positions in Nvidia and has the following options: short October 2025 $160 calls on Nvidia. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Man looks up at apple on his head.
International Stock News

Why the Google antitrust ruling could deal a blow to Apple's profits

An upcoming ruling in the case could severely affect a key high-margin revenue stream for the iPhone maker.

Read more »

Woman and man calculating a dividend yield.
International Stock News

Nvidia and Microsoft stocks have reached a $4 trillion valuation. Is Apple next?

Is Apple falling behind, or will it come from behind?

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
International Stock News

Should you buy Berkshire Hathaway while it's below $470?

The conglomerate's shares have fallen by roughly 15% from their 52-week high.

Read more »

Humanoid robot analysing the stock market, symbolising artificial intelligence shares.
International Stock News

After hitting $4 trillion, it took Nvidia just 1 month to gain another $480 billion in market cap. Is $5 trillion inevitable?

Nvidia's stock price is surging, putting pressure on the company to keep delivering impressive results.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

If you'd invested $1,000 in Berkshire Hathaway stock 5 years ago, here's how much you'd have today

Buying and holding quality stocks is a better bet than chasing hot growth trends.

Read more »

Amazon boxes stacked up on a doorstep.
International Stock News

Thinking of buying Amazon stock? Here's 1 green flag and 1 red flag.

Amazon stock may not be the pure retail bet it once was.

Read more »

A woman sits at her desk thinking. She is surrounded by projections of world maps on various screens with data appearing below them.
Share Market News

Will ASX shares outperform global equities in FY26?

Global equities have delivered superior growth for 3 consecutive years. But is the tide turning?

Read more »

happy woman looking at her laptop with notes of money coming out representing financial success and a rising share price and dividend yield
International Stock News

Up 26% since April, can the S&P 500 keep charging higher into 2026?

A top broker unveils three scenarios S&P 500 investors should keep a close eye on.

Read more »