As global stock markets tumble over deepening worries about war in the Middle East, Nvidia, the world's most valuable company, finds itself trading at its cheapest price-to-earnings multiple since before ChatGPT kicked off the AI boom.The steep drop in Nvidia's PE suggests the dominant AI chipmaker's shares may be a bargain, but one tied to risks and uncertainty that have shaken investors' confidence in the so-called AI trade that has driven Wall Street higher in recent years.Shares of Nvidia have tumbled nearly 20% from their record high close in October, with the company caught up in a broad market selloff over fears that the US and Israeli war on Iran will keep oil prices elevated and fuel a wave of inflation that could force central banks to raise interest rates.The stock fell 2.2% on Friday, reflecting declines across Wall Street, and it is on track to lose about 10% for the first quarter.Investors have also worried in recent months that heavy spending on AI infrastructure by Microsoft, Alphabet , Amazon and other Nvidia customers may be taking longer than expected to pay off with increased revenue and profits. These combined concerns have bled over $800bn from Nvidia's stock market value, now at about $4tn, even as the Silicon Valley company reported successive quarters of climbing gross margins, now at 75%, and as analysts raised their estimates for future earnings growth.As a result of those stock declines and increased analyst estimates, Nvidia's shares are now trading at about 19.6 times its expected 12-month earnings, their lowest valuation since early 2019, a year before the coronavirus pandemic and four years before OpenAI's launch of ChatGPT ignited a rally in the shares of Nvidia and other AI-related stocks.Investors use PE multiples to compare the value of stocks in terms of their expected future earnings.Nvidia's PE valuation is also lower than the aggregate PE of the S&P 500, now at about 20 following a 7% drop in the benchmark so far this year. This is notable because investors typically reward fast-growing companies with higher PE valuations than companies with slower profit growth.Analysts see the aggregate earnings of S&P 500 companies growing 19% in 2026, compared to an average growth estimate of over 70% for Nvidia in its current fiscal year, according to LSEG data.Shares of software companies slumped in recent months over worries that AI could lead to tighter competition and hurt their profit margins. Future developments in AI technology could similarly affect hardware technology companies, including Nvidia, said Dennis Dick, a proprietary trader at Triple D Trading. "All technology, no matter what, including Nvidia, could potentially be disrupted, and that’s the risk factor right now,” said Dick.”Everything’s running on Nvidia chips, but that doesn’t mean it’s going to be that way in two or three years. Everything is changing so rapidly, and I think that’s the overall market concern.”For most of its history, Nvidia's primary business was designing high-performance graphics processing units for the video game market, and it transitioned only in recent years to become the dominant supplier of those chips for AI applications.Its shares have surged over 1,000% since the launch of ChatGPT kicked off a race to dominate AI technology and insatiable demand for Nvidia's components. Microsoft has also seen its PE decline in the recent market selloff, now down to about 20 from 35 in August last year, while AI rival Alphabet's PE has come down to 24 from almost 30 in January.Art Hogan, chief market strategist at B. Riley Wealth, said his firm continues to recommend Nvidia to its clients. "Trading at a multiple that is lower than the S&P 500, I think it's an easy decision to make," Hogan said.
