Nvidia's stock price has returned to its pre-AI boom level. Is it still a good bet?

In just under two months, Nvidia has lost about $1 trillion in market capitalization, and its price-to-earnings ratio has fallen back to levels last seen seven years ago. The company’s stock is trading at a level last seen before the artificial intelligence boom even began. Investors must now decide whether this is a sign that the major AI bet of recent years has run its course, or a correction ahead of a new rally.

During trading on July 8, Nvidia shares remained virtually unchanged from the previous close, trading at around $196.50 each.

Since hitting an all-time high on May 14, Nvidia’s stock has fallen 16%. The company’s market capitalization is now 18 times its projected annual earnings—it hasn’t been valued this low since early 2019, according to Bloomberg. In terms of revenue growth, the de facto monopoly in the AI chip market ranks fourth in the S&P 500 this year. At the same time, Nvidia’s forward P/E ratio (the company’s share price relative to its projected earnings per share) is lower than that of roughly half the companies in the index—including candy maker Hershey’s and utility company Dominion Energy, the agency notes.

Investors betting on AI are shifting their money to another segment—memory chips and storage devices. The PHLX Semiconductor Index has risen 72% since January and is on track for its best year since 2003, while its leader, Micron, has risen 229% after a 239% gain the previous year. Nvidia itself gained only 5.6% in 2026, lagging behind both the S&P 500 (+9.6%) and the Nasdaq 100 (+16%). On the PHLX—which includes the stocks of the 30 largest chipmakers—Nvidia currently ranks third from the bottom in terms of growth, although it was second in 2024, according to Bloomberg.

Nvidia’s business, however, has not suffered. The company controls 97% of the market for AI server chips, up from 95% a year earlier; demand for equipment for new data centers remains strong; and its earnings forecast for the past three months has risen by 13%. Sales and profitability have not declined—which is why Randy Hair, an equity analyst at Huntington Bank, believes the stock is undervalued. “The stock follows earnings,” he says, and he expects Nvidia’s share price to resume its upward trend in the coming months.

Most of his colleagues agree with Hayr: of the 82 analysts who cover Nvidia, only three recommend holding the stock and one recommends selling it. The average price target of $302 implies growth of more than 50% over the course of a year—the highest potential among the “Magnificent Seven” tech giants.

Nvidia has already gone through similar periods of correction and quickly recovered its losses, notes Fulton Breakefield Broenniman analyst Michael Bailey. “It was a tough period, but we’ve seen this before: a fairly sharp decline was followed by an equally rapid recovery,” he noted. “All the bulls can do now is hold their breath (wait it out — Oninvest).”

Short-term traders haven’t written off Nvidia either. On July 7, demand for call options (betting on a price increase) on Nvidia shares was twice as high as demand for put options (betting on a price decline). Across the sector as a whole, the picture is the opposite: according to the SMH exchange-traded fund, whose portfolio consists entirely of chipmakers’ stocks, bets on a decline were nearly four times greater than bets on an increase, CNBC reports. “It appears that traders are expecting Nvidia’s two-day rally to turn into a sustained rally,” the network noted.

This article was AI-translated and verified by a human editor