After record run, Nvidia enters rare valuation reset: What to expect?

After a blistering rally that defined much of last year’s stock market boom, Nvidia is once again trading at valuation levels rarely seen during its AI-driven ascent, reigniting debate among investors about whether the pullback represents risk – or opportunity.

Shares of the chipmaker have retreated from their late-2025 highs, trimming roughly 10 per cent from peak levels. While the move has unsettled momentum traders, analysts point out that Nvidia’s forward price-to-earnings ratio has fallen back near levels last seen in spring 2025, a period that preceded one of the stock’s strongest surges.

The broader backdrop this time is different. Markets are no longer reacting to tariff shock headlines or sudden policy uncertainty, but instead recalibrating after months of optimism priced into mega-cap tech stocks. Despite the cooling sentiment, Nvidia’s underlying growth story remains largely intact, driven by relentless demand for AI computing infrastructure.

AI ARMS RACE KEEPS PRESSURE ON CHIP SUPPLY

Nvidia continues to dominate the market for advanced graphics processing units used in artificial intelligence, even as competition intensifies. Major cloud and technology companies have already announced record capital expenditure plans for 2026, doubling down on data centers and AI capacity after heavy spending in 2024 and 2025.

Company executives believe this is only the beginning. Nvidia projects that global data-center investment could reach trillions of dollars annually by the end of the decade, positioning the company as a central supplier in what many see as a long-term infrastructure buildout rather than a short-lived tech trend.

That demand is reflected in Wall Street forecasts, which expect Nvidia’s revenue growth to remain above 50 per cent into its next fiscal year – an extraordinary pace for a company already valued in the trillions.

MARKET PULLBACK SHIFTS THE NARRATIVE

The recent pullback has less to do with weakening fundamentals and more with valuation normalization, analysts say. As tech stocks broadly cooled from late-2025 highs, Nvidia’s stock followed suit, returning to a pricing range that some investors view as more sustainable.

Whether the stock repeats its previous rapid climb remains uncertain, particularly as geopolitical risks, export controls, and broader economic conditions continue to evolve. Still, Nvidia’s position at the center of the AI supply chain means it remains tightly linked to one of the market’s most aggressive spending cycles.

For now, Nvidia’s latest phase may not be about explosive rallies, but about whether consistent earnings growth can justify its leadership role in a rapidly expanding AI economy – one data center at a time.