$NVDA · Jose Najarro Stocks · 2026-11-07

Nvidia is down 22% from its year-to-date high, which was around early October. We saw the company hit around $240. Now, the stock is sitting at roughly $186.

Now, what's crazy is the forward next 12 months PE ratio is sitting at 13.1x depending on what consensus you're looking at, right? I think believe Sachs consensus right now has it around 13 forward PE ratio.

That is insane, right? one of the cheapest companies out there.

today I really want to take a closer look at one of my favorite semiconductor plays, Nvidia.

Now, Nvidia, right? I think this is insane. Sitting at a forward PE ratio of 13, right? 13 is crazy when you have other players.

So it's not that different companies but the great thing about Nvidia is this is one that is growing massively. Right? Next fiscal year is expected to grow 70%. And I don't believe anything has changed.

I don't think it's going to impact much on the demand for fiscal year 2027. And I believe even 2028, we're still going to continue to see strong buildouts in data centers.

instead of Nvidia trading at a 4 PE ratio of 15, it might end up trading at a 4 PE ratio of 25 or 30. Uh so so that's what the market is expecting.

Maybe Nvidia goes from a 4p ratio of 13 to 15. That's still extremely extremely cheap.

Now, for Nvidia, I mean, we're we're doing pretty good, right? Many people just talk of Nvidia and just think about an AI chip, right? That's not Nvidia. Nvidia builds whole data centers, right?

We saw the whole DGX pod. They have GPUs, they have CPUs, they have Envy Link for scale up, they have Spectrum X for scale out, they have CUDA for software. Uh they work with everybody to again, you call Nvidia, you tell them, "Hey, I need a 1 gawatt data center."

This is how you're going to do it and I have all the partners. That is a massive massive moat. They are building AI factories. They're not just building a chip.

We saw kind of management talk about the opportunity in Blackwell. A gigawatt was around $25 billion in revenue. Vera Rubin, which is the one that's expected to be released right now and ramping 40 billion per gigawatt in Vera Rubin.

That is going to we want to hear any updates on that on on the upcoming earnings call.

But this is what is exciting about them as they are able to pack more in data centers with the efficiencies that they do uh with the improvements that they do in the partners that they have in manufacturing with the energy efficiencies that they're able to do with things like optics with copper um with scale up with scale out.

This allows them to sell more to increase the prices of their products and you to be able to see an increase in dollar worth per gawatt solutions.

The market believes this is just a hypers scale market, right? But hyperscalers make up roughly 55% of this company's total revenue when it comes to the data center space. Maybe a little bit closer to 60, but that's most recently because SpaceX became part of hyperscalers when they used to be part of the AI cloud enterprise and sovereign and sovereign community customers.

It's no longer part of that. It's now part of the hyperscalers and that helped it grow dramatically. If not, this would be closer to 50/50. But the they they shifted just because SpaceX is growing so so quickly.

But $40 billion in the most recent quarter came from AI clouds, enterprise, and sovereigns. I think this is going to continue to grow.

So if AMD is able to grow at these levels, I can't imagine once we get Nvidia's earnings the for Nvidia investors again people are going to see this and say competition competition is real.

I believe competition is real, but I also believe the supply chain issues and the constraints in the market are even realer. I don't know if that's a real term, but or or even bigger than competition.

So Nvidia is going to continue to be able to sell out as much as they can.

We heard from Nvidia last quarter that the only reason they believe next year they can grow fiscal year of of 70% was because of supply constraint. It was for nothing else. If they were able to get more supply, they would be able to grow more.

And I don't think AMD's new products or any of the other new products in the chip market are going to shift that at all. Right? It's not going to shift that at all.

what happens if other neocloud companies what happen if other hyperscalers do the same thing are they going to start slowing down because money is drying up or becoming too expensive I think that's a right fear to have but again I just believe the demand is so crazy and that's why we're seeing an increase in in funding as well in pricing of funding right if you have too much demand in funding funding is going to say yeah I mean there's so much demand right now we can actually charge a higher rate because it's a supply and demand world just like everything else so again some people might take that as fear I personally do not but it's good to know the other fear happening in the market right now is margin reset right for quarter 3 they guided around 74 basis uh 74% gross margins.

Now unfortunately for quarter 4 they mentioned it's going to be somewhere around the low71 to 72 the main recent memory pricing right HBM market is expected to increase dramatically during that time frame pretty exciting if you are a a memory player but then in fiscal year of 2028 it's going to settle somewhere between 72 and 73%.

So the market sees this and says, "Hey, look, margins. You're you're you're going down in margins. You're telling us is because of memory pricing, but could the real issue be competition? Could the real

the other fear happening in the market right now is margin reset right for quarter 3 they guided around 74 basis uh 74% gross margins. Now unfortunately for quarter 4 they mentioned it's going to be somewhere around the low71 to 72 the main recent memory pricing right HBM market is expected to increase dramatically during that time frame pretty exciting if you are a a memory player but then in fiscal year of 2028 it's going to settle somewhere between 72 and 73%.

So the market sees this and says, "Hey, look, margins. You're you're you're going down in margins. You're telling us is because of memory pricing, but could the real issue be competition?

Could the real price issue be demand that you have to decrease your prices?" And this is again kind of the time when the market asks questions, creates that uncertainty and reprices the stock based on these uncertainties.

I personally believe the margin reset is truly because of the memory and has nothing to do with competition and it has nothing to do with demand. Nvidia is going to find ways to improve those margins and I do believe we're going to be closer to the higher end of 73 for fiscal year of 2028 potentially even closer to 74%.

why is the markets why the market sold right they talked about it the risk right funding even strong demand can weigh on capital markets what we saw from Iran concentration you have five direct customers that are a big portion of this company's total revenue they're all building their own AI chips then you have some news of of delays in data centers and you have the competition in China you also have some rumors right now facing Jensen which I don't want to talk about because again it's all rum rumors, but things like that are creating are creating fears for the AI industry.

I mean, right now, the stock is sitting at around $187. If you give it a 4 PE ratio of 15, it's going to sit at $213. Nothing crazy at all. Now, even if you get a 20% earnings cut, the stock at a 15% next 15x next 12 months is still fairly valued.

I don't think we're going to see any form of earnings cut.

Long-term, I remain bullish on Nvidia full stack, but this buildout has to turn into usable capacity and cash. And I believe it is, right? I think the AI market is true. I don't know when the market is going to change its mind, when it's going to say, you know what, AI data centers are good.

But I think it is. Things I'm going to be watching are deployments, customer funding, and earnings.