Key Points
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AI hyperscalers releasing their capital expenditure projections early could kick-start a rally for Nvidia.
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The chipmaker’s stock is priced at a dirt-cheap level.
- 10 stocks we like better than Nvidia ›
Nvidia (NASDAQ: NVDA) has had a solid 2026, rising about 21% so far this year. While that’s beating the market, Nvidia investors are used to far greater returns. Fortunately for its shareholders, I think October could be the month that flips it around.
The market still isn’t pricing any of Nvidia’s massive expected growth in 2027 into the shares, but it could start to take that into account as the AI hyperscalers roll out their 2027 guidance for data center capital expenditures. That could confirm everything Nvidia has said about its expectations.
If this happens, Nvidia stock is primed to soar, as it’s currently priced at a pretty attractive level.
Q3 results could reveal some incredible expectations
Nvidia has gotten a bit ahead of the curve in issuing guidance. During Q2, it revealed an incredible outlook that the market quite frankly shrugged off. The company announced that it expects to deliver 70% revenue growth during fiscal 2028 (which will end in January 2028). Considering Nvidia’s size as a $5 trillion company, that growth rate is simply incredible.
Sales to AI hyperscalers are driving that forecast, as this cohort is expected to ramp up its spending on data centers again in 2027. The big five hyperscalers are expected to spend nearly $800 billion on data center build-outs this year, and the current estimates are for their capex to rise to $1.3 trillion next year. That’s just according to Nvidia’s projections, which are likely pretty accurate, given what it knows about its key customers’ plans.
These AI hyperscalers likely have their 2027 expansion plans set in stone already and have provided demand forecasts to Nvidia so the company can properly prepare its supply chain to meet them as far as is possible. So, I think investors can trust these projections, but the market really hasn’t put any weight on them.
Given how large some of the build-out plans are expected to be, don’t be surprised to see some of the AI hyperscalers start to reveal their 2027 capital expenditure guidance during Q3 earnings, as it will give the market more time to digest these massive figures. Many companies report in the second half of October, which makes the start of the month a great time to load up on Nvidia shares, as the market apparently isn’t quite convinced that Nvidia will see as much growth as it’s projecting.
If AI hyperscalers confirm that growth, the market will need to revisit Nvidia’s stock, as it is currently mispriced.
Nvidia’s stock is cheap
Right now, Nvidia trades at a pretty attractive 28 times trailing earnings.
NVDA PE Ratio data by YCharts.
However, this trailing earnings ratio doesn’t reflect any of next year’s estimated 70% growth, nor the growth Nvidia has delivered over the last two quarters of this fiscal year. Those results will make the stock look incredibly cheap, and if we value Nvidia using fiscal 2028 earnings projections, the stock tumbles to an incredibly cheap ratio of 14.
NVDA PE Ratio (Forward 1y) data by YCharts.
I think a fair, long-term valuation for this company would be about 30 times earnings. If Nvidia meets all analysts’ expectations and rises to 30 times trailing earnings, the stock could more than double between now and the end of its fiscal 2028. That makes Nvidia a stock well worth buying today.
Its rally could kick off during October, making now the ideal time to buy, as the market may start to take Nvidia’s long-term projections a bit more seriously once the hyperscalers start to roll out guidance for next year.
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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.