A growing chorus on Wall Street is beginning to view Nvidia, long seen as the poster child of the artificial intelligence boom, through an unexpected lens: that of a value stock.
The shift in perception comes even as the chipmaker continues to dominate the AI hardware market.
But with its market capitalisation already towering and expectations of exponential growth moderating, investors are reassessing how to value the company.
Television host Jim Cramer captured the sentiment succinctly this week, saying Nvidia has effectively become a value stock, reflecting a broader rethink among market participants.
Growth narrative shows signs of cooling
Despite strong fundamentals and continued innovation, Nvidia’s stock has struggled to break out of a narrow trading band.
Shares have largely remained in the $180–$190 range since last summer, even after well-received product announcements at its GTC conference.
Investors appear to be shifting their focus within the AI ecosystem, increasingly looking at opportunities in adjacent segments such as memory chips and optical networking rather than the dominant player itself.
While Nvidia’s revenues and cash flows continue to expand, the prospect of the company doubling in size again from its already elevated base is seen as less likely in the near term.
Shift toward shareholder returns strengthens case for value re-rating
Nvidia trades at a forward price-to-earnings ratio of just over 21 times, broadly in line with the S&P 500 average, suggesting it is no longer priced at a steep premium typical of high-growth technology stocks.
“But by other standards, Nvidia is acting more like a value stock than a growth play,” Barron’s said.
A key factor behind the evolving narrative is Nvidia’s increasing focus on returning capital to shareholders.
The company has indicated it plans to distribute 50% of its free cash flow through dividends and share buybacks.
With projections suggesting free cash flow could reach $171.76 billion in 2026, this would translate into more than $85 billion returned to investors.
This approach draws comparisons with Apple, which has long prioritised shareholder returns and commands a premium valuation despite questions around its growth trajectory.
“It’s a comparison that might not excite shareholders as Apple faces questions about its record of innovation in recent years. But Apple’s consistent returns have led to a premium valuation, with the iPhone maker trading at a forward PE ratio of more than 28 times currently,” Barron’s said.
“If Nvidia can emulate that, shareholders will be rewarded, even though it’s not quite the explosive gains of yesteryear,” the report said.
Growth-adjusted metrics support bullish view
Under the price-to-book metric, a ratio below 1 is typically seen as attractive, implying the stock is trading below its asset value.
For instance, a ratio of 0.8 suggests investors are effectively paying $0.80 for every $1 of assets.
On that basis, the stock appears expensive.
Nvidia’s ratio stands at around 29, significantly higher than peers such as Amazon and even consumer giants like Walmart and Costco.
However, some analysts caution that such metrics may not fully capture the value of modern technology firms, particularly those driven by intangible assets and rapid innovation cycles.
Michael Lebowitz, a portfolio manager at RIA Advisors told MarketWatch price-to-book ratio can be a weak metric for determining value stocks, and this may be particularly true for high growth tech companies.
He instead advises investors to look at earnings growth through the price/earnings-to-growth (PEG) ratio, arguing it offers a more relevant measure by linking a stock’s valuation to the pace of its expected profit expansion.
By traditional metrics, Nvidia appears expensive, with a price-to-book ratio of around 29, compared with about 6 for Amazon, according to FactSet data.
The same ratio stands at roughly 9.5 for Walmart and 14.3 for Costco, suggesting those retailers look more attractively valued than Nvidia, though less so than Amazon.
However, factoring in growth through the PEG ratio presents a different picture.
Nvidia’s strong earnings outlook brings its PEG ratio to about 0.78, indicating potential undervaluation for investors focused on profit growth, while Walmart and Costco appear less compelling on this basis, with ratios of 5.76 and 5.2, respectively.
“If you do any kind of realistic forward-looking valuation analysis, you quickly find that Walmart is anything but a value stock, and Nvidia is a value stock – and could even be considered a deep-discount value stock,” Lebowitz told MarketWatch.
“I’m a value guy, and for the first time in four years I’m buying Microsoft,” Chris Grisanti, chief market strategist and a portfolio manager at MAI Capital Management, told MarketWatch.
“I am genetically opposed to buying stocks like Nvidia, which are such market darlings, but I can’t look at that math and turn away from it. It’s just too compelling. For the first time ever, we’ve bought Nvidia in our value portfolio.”
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