Since NVIDIA (NASDAQ: NVDA) joined the trillion-dollar club in 2023, its market capitalisation has reached an eye-watering peak of US$5 trillion.
However, good stocks are only good investments if one doesn’t pay too much for them.
Here’s the five trillion-dollar question: Is it too late to buy NVIDIA?
We unpack the drivers behind NVIDIA’s rise to find out.
How NVIDIA Reached Trillion-Dollar Status
From its humble beginnings as a gaming graphics processing unit (GPU) provider, NVIDIA currently derives most of its revenue from the Data Centre segment through a single, ubiquitous platform running every AI model in the world.
Such ubiquity puts it in a unique position to address all three massive platform shifts:
- From CPU to GPU-accelerated computing
- From classical machine learning to generative AI
- The rise of agentic and physical AI
For the first nine months ended 26 October 2025 (9MFY2026), NVIDIA’s revenue grew by over 62% year-on-year (YoY) to US$147.8 billion, with profits rising by close to 52% YoY to US$77.1 billion.
NVIDIA’s vast customer base, spanning cloud service providers (CSPs), sovereign nations, enterprises, and research institutions, has unleashed massive spending on NVIDIA’s offerings, pushing its market value to trillion-dollar heights.
Crucially, with top CSPs and hyperscalers projected to increase AI spending to US$600 billion in 2026, NVIDIA’s growth momentum remains strong.
What’s Driving NVIDIA’s Current Valuation
With the current price per share of approximately US$186.50, NVIDIA’s P/E ratio is around 46, slightly above the semiconductor industry’s P/E of over 40.
The verdict?
NVIDIA is not excessively expensive relative to the industry it operates in.
Such a valuation reflects a combination of its strong competitive edge over its semiconductor peers and investors’ confidence in the future demand for its compute solutions.
Indeed, given its customers’ demand outstrip supply, and the full utilisation of both its new and existing GPU architecture, the backlog is likely to grow even further, justifying its premium valuation over the rest of the industry.
Can NVIDIA’s Growth Continue? Signals to Monitor
Investors should monitor whether NVIDIA can meet the following strategic growth milestones:
- The near-term fulfillment of the US$0.5 trillion backlog for its latest Blackwell, and Rubin architectures.
- The long-term fulfillment of up to US$4 trillion worth of annual AI infrastructure spending.
- Revenue expansion into sovereign AI as an additional growth pillar beyond the traditional hyperscale market.
Already a major AI chip designer, these milestones will mark NVIDIA’s successful transition into an indispensable AI data centre infrastructure company.
Risks That Could Slow NVIDIA’s Momentum
Being heavily reliant on third-party services, such as Taiwan Semiconductor Manufacturing’s (NASDAQ: TSM) advanced CoWoS (Chip-on-Wafer-on-Substrate) technology to package its GPUs, a major disruption in their availability could throw a spanner in NVIDIA’s growth momentum – something investors should monitor closely.
In geopolitics, export controls imposed by the US government have effectively closed off NVIDIA’s entry into the Chinese market, allowing Chinese competitors to catch up with NVIDIA’s offerings and potentially compete against them.
Being the “singular platform powering every AI model”, NVIDIA’s GPU likely offers more value over competitors when bundled with its software stack.
However, possible competition might arise from in-house chips built by cloud providers.
In particular, Alphabet’s (NASDAQ: GOOGL) TPU is observed to also operate within its own vertically integrated stack with notable efficiencies, potentially decoupling itself from Alphabet’s reliance on NVIDIA for its compute needs.
While monitoring NVIDIA’s growth signals, investors should keep these risks in view.
Get Smart: Understand the Story Behind the Surge
NVIDIA’s trillion-dollar valuation is high, but not unreasonably high, given its unmatched dominance and overwhelming growth prospects.
While its ability to uphold the status of a “singular platform powering every AI model” has so far kept competition at bay, it’s not entirely immune to competitive pressures and geopolitical risks.
Still, overall, its fundamental growth potential outweighs its risks.
In a bull market, while any stock can surge amid sensational headline news, sustaining the momentum requires a compelling growth story to justify its rise.
Investors should look beyond the trillion-2023 milestone and ensure NVIDIA’s valuation continues to be backed by fundamental growth drivers shaping its next chapter, not merely rely on headline valuations.
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Disclosure: Larry owns shares of NVIDIA and Alphabet.
