Nvidia (NVDA -4.57%) has reached a scale where its sheer size and market capitalization can appear intimidating. Over the past five years, the stock has surged 817.8%, while its market capitalization has climbed from roughly $557 billion to about $5 trillion today — meaning Nvidia is now worth approximately 9.1 times what it was five years ago. This growth has not been driven by hype: the company generates tens of billions of dollars in quarterly revenue, its AI chips sit at the heart of the industry's infrastructure buildout, and profitability has expanded at a remarkable pace.

Nvidia's fiscal second-quarter earnings, released on Aug. 26, indicate that growth is far from slowing. Surprisingly, despite getting dramatically bigger, the stock still trades at a reasonable valuation.

Nvidia Has Become Huge, and the Next Product Cycle Could Keep the Numbers Moving

In the second quarter of fiscal 2027, Nvidia generated $96.2 billion in total revenue, up 106% year-over-year, while adjusted earnings rose 120% to $2.22 per share. The data center business continues to dominate revenue, with Blackwell playing a significant role: segment sales reached $89 billion in the quarter, up 18% sequentially and 117% year-over-year.

Management said capital expenditures by the five largest hyperscalers — potentially about $800 billion in 2026 and $1.3 trillion in 2027 — are fueling the data center segment's growth. While Nvidia does not capture all of that spending, it illustrates the scale of the infrastructure market in which the company operates. That spending backdrop also frames the key question for investors: hyperscaler capex is cyclical, and Nvidia's revenue is closely tied to it, so any slowdown in AI infrastructure budgets would directly affect the data center segment that now drives the vast majority of the company's sales.

Nvidia is also deepening its partnership with Amazon's (AMZN) AWS. Between this quarter and the second quarter of fiscal 2029, AWS intends to deploy an additional 2 million Nvidia GPUs alongside Vera CPUs, with some systems incorporating Rubin. The partnership extends beyond hardware: AWS will offer Nvidia's Nemotron models through its cloud services, and Amazon also plans to use Nvidia's broader physical AI technology for warehouse robotics.

While existing products already dominate the industry, another major product transition appears to be underway. Blackwell continues to contribute heavily, Rubin is beginning its ramp, CPUs and networking are expanding, and new customers are emerging across sovereign AI, enterprises, NeoClouds, and AI labs. Management now expects Vera Rubin to be the company's fastest-growing product in history.

Nvidia forecasts third-quarter revenue of approximately $108 billion, plus or minus 2%, with Vera Rubin accounting for roughly 20% of data center revenue. Management also projected a 70% revenue increase in fiscal 2028, noting that this forecast is constrained by supply. For investors tracking the story going forward, the pace of the Rubin ramp, whether supply constraints ease, and whether hyperscaler capex guidance holds up through 2027 are the practical checkpoints for judging whether these targets stay on track.

Bigger, But Not More Expensive

The market may still view Nvidia simply as the company selling the chips behind today's AI boom, but its opportunity is expanding beyond individual GPUs. The company is finding ways to generate substantially more revenue from each unit of power deployed in an AI data center — an opportunity management sees reaching roughly $40 billion per gigawatt with Vera Rubin, more than twice the level associated with Hopper. Nvidia is also expanding into CPUs, networking, and broader AI infrastructure.

Despite this, the stock remains reasonably valued at 23x forward fiscal 2027 earnings. Analysts expect revenue to rise 83% to $396.73 billion in fiscal 2027, with EPS climbing 89.8% to $9.05. Revenue and earnings are then expected to grow another 44.6% and 45%, respectively, in fiscal 2028. The company's own outlook lends credibility to these estimates: demand remains strong, supply is still constraining growth, new products are expanding the opportunity per gigawatt, and Nvidia is moving deeper into networking, CPUs, software, and full-stack AI infrastructure. Relative to the pace at which earnings and revenue are expanding, the valuation looks reasonable.

Why Is NVDA Stock Still Reasonably Valued?

After years of extraordinary expansion, the market may be pricing in a significant slowdown, and competition could be the main reason. Nvidia's biggest customers are increasingly becoming its strongest competitors: Alphabet's (GOOG) (GOOGL) Google has its TPUs, Amazon has its Trainium, Microsoft (MSFT) is developing its own silicon, and OpenAI, Anthropic, and Meta (META) have also been working on custom chips. Separately, Advanced Micro Devices (AMD) is building a credible second source of AI computing — an "escape hatch" from Nvidia. One countervailing factor is Nvidia's CUDA software ecosystem, developed over roughly two decades, which many AI developers still build on; replicating that software layer, not just the silicon, is part of what makes displacement difficult for would-be rivals.

Taken together, the reasonable valuation suggests the market may be pricing Nvidia for slowing growth, rising competition, and a maturing AI spending cycle. However, Nvidia's recent Q2 earnings and outlook suggest the market may be underestimating how long its growth can remain elevated. If growth stays stronger five years out, today's valuation could prove an attractive entry point for long-term investors.

On Wall Street, NVDA remains a consensus "Strong Buy." Of the 48 analysts covering the stock, 43 have a "Strong Buy" recommendation, three rate it a "Moderate Buy," one has a "Hold" rating, and one has a "Strong Sell" rating. The mean analyst target price of $307.38 implies potential upside of 37% from current levels, while the high estimate of $500 implies upside of 122% over the next 12 months.

On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned. This article is solely for informational purposes and was originally published on Barchart.com.