Nvidia (NVDA) Looks Cheap on Piper’s Forecasts, but the Earnings Assumptions Are the Real Test

Nvidia may now be one of the most affordable stocks in the AI sector, according to Piper Sandler. The company trades at a 14x estimated fiscal 2028 earnings multiple, with an implied PEG ratio of 0.3. Analyst David O' Connor initiated coverage on Nvidia with an Overweight rating and a $300 price target, indicating roughly 34% upside potential.

Piper Sandler believes Nvidia's dominance in the AI compute market, controlling an estimated 80% of the market by value and 50% by units, is a key reason for its lower valuation. The chipmaker's robust demand is translating into profitability, with a 106% year-over-year revenue increase to $96.2 billion in fiscal 2027 and data center revenue surging 117% to $89 billion.

However, the real test for Nvidia lies in executing its annual product cadence as competitors attempt to reduce reliance on its GPUs. The valuation heavily relies on growth assumptions, and any meaningful slowdown in spending, product execution, or profitability could make the 14x multiple less attractive. Hedge funds remain bullish on Nvidia, with 285 holding the stock at the end of the second quarter, compared to 275 in Q1.