1 Metric That Still Suggests Nvidia Is a Steal of a Deal

Nvidia (NASDAQ: NVDA) stock has been losing steam of late. Entering trading on Tuesday, shares of the popular chipmaker were in negative territory for the year, down a little under 1%. It's still early in the year, but for a stock that generated 171% gains in 2024, the slowdown is noteworthy.

It remains one of the most valuable companies in the world with a market cap of around $3.3 trillion, but despite its high valuation, there's a case to be made that Nvidia may still be a great buy. And based on one metric, it may even be a steal of a deal right now.

A multiple that investors often use to value stocks is the price-to-earnings (P/E) ratio. That tells you how expensive a stock is in relation to its profitability, on a per-share basis. But P/E multiples can vary based on how much growth a business is generating and the sector that it's in. Nvidia's P/E multiple is more than 50, which seems high, but it may be justifiable if you're expecting a lot of growth from the business down the road.

This is where a multiple such as the price/earnings-to-growth ratio, or PEG, comes in handy. It factors in analyst expectations for future growth. If the PEG ratio is around 1 or less, that's generally an indicator it's a great buy based on expected growth. According to data from Yahoo! Finance, Nvidia's PEG ratio, based on its expected growth rate for the next five years, currently sits at 0.96, suggesting that is a deal given the current outlook from analysts.

Based on its low PEG multiple, it may be tempting to think that Nvidia still has a lot more upside. And it might, over the long term. But the PEG ratio relies on analyst estimates, which may change over time. And changes could happen soon, especially amid growing questions about whether tech companies are investing too heavily into artificial intelligence (AI).

Investors appear to be growing concerned about tech spending due to the emergence of the DeepSeek AI model, which is supposedly as effective as ChatGPT but costs significantly less. And if that's the case, investors may be wondering whether all those Nvidia chips are truly necessary for AI development.

Nvidia's massive growth in recent years has been a key reason investors have remained bullish. And if a slowdown does happen, that could very well impact the stock, potentially resulting in a sell-off. Investors will get a better idea of how strong demand is when Nvidia reports its earnings later this month, and that could ultimately dictate how hot of a buy the stock is in the weeks ahead.