Think Nvidia Stock Is Too Expensive? Here Are 60 Billion Reasons to Consider Changing Your Mind

I’ve watched Nvidia’s meteoric rise with equal parts awe and skepticism. Since ChatGPT’s launch in November 2022, this semiconductor juggernaut has delivered a mind-boggling 10x return to investors who had the foresight (or luck) to jump in early.

The numbers are staggering. Nvidia’s market value has exploded from $345 billion to over $4 trillion as tech behemoths like Microsoft, Alphabet, Meta, Amazon, and Oracle have funneled billions into AI infrastructure, with Nvidia chips at the heart of this revolution.

But I can’t help wondering: after such astronomical gains, surely the party must be ending soon? Yet just as the skeptics (myself included) start calling a top, Nvidia’s management throws a $60 billion curveball that forces me to reconsider.

Looking at valuation metrics, Nvidia trades in line with its three-year average price-to-sales ratio and well below its AI-hype peak. Its P/E ratio of 49 might seem steep in absolute terms, but it reflects Nvidia’s dramatically expanded profitability rather than irrational exuberance.

What really caught my attention was the company’s aggressive stock repurchase strategy. After buying back $24.2 billion worth of shares in the first half of the year, management announced an additional $60 billion buyback program. This isn’t just a vote of confidence - it’s a strategic move that reveals their longer-term thinking.

While Nvidia has thrived on chips for training large language models, the real future upside lies in more advanced applications - robotics, quantum computing, autonomous systems - each potentially representing trillion-dollar markets. These applications will require next-generation architectures like the upcoming “Rubin” chips.

The catch? The timeline. It could be 5-10 years before these sophisticated use cases significantly transform Nvidia’s profitability. This is precisely why the massive buyback program is so clever - it’s a bridge strategy. By reducing outstanding shares, Nvidia can maintain robust EPS growth during this transitional phase while waiting for the next wave of AI applications to mature.

I’ve shifted from skeptic to cautious optimist. Nvidia combines structural growth drivers with shareholder-friendly capital allocation. The management team clearly believes their stock remains appropriately priced despite its meteoric rise.

For those watching from the sidelines thinking they’ve missed the boat, perhaps it’s time to reconsider. The AI story - and Nvidia’s central role in it - may still be in its early chapters.