NVIDIA's Big Bounce Incoming: Oversold, Buying Back, and Our $240 Target
The world's most important AI company is growing revenue more than 100% a year, buying back its own stock at a record pace, and trading at its cheapest multiple in a decade. Somebody dropped the ball. We think it's about to bounce.
The setup: a great business, a beaten-up stock
NVDA closed Friday, October 16 at $214.13, down 1.43% on the day, according to The Motley Fool's quote data. That came after a rough week for chips: Yahoo Finance reports a spike in CoreWeave's bond yields revived worries about debt-heavy AI customers and dragged the whole semiconductor group lower.
That's the sell-first-think-later trade. Two weeks earlier, on October 2, NVIDIA had just hit a record high. Per CNBC, it has still underperformed the Philadelphia Semiconductor Index by about 55% this year, even with roughly 97% of the server-GPU market. And CNBC's market coverage is calling the same bounce we are, with Monday's live updates framing the chip selloff as overdone. In our view, the stock looks oversold against what the business is actually doing.
The business isn't slowing down
- $96.2 billion in fiscal Q2 2027 revenue, up 106% from a year earlier (Yahoo Finance).
- $192.88 billion in net income over the past 12 months, with about 65% operating margins.
- Analysts expect close to $385 billion in fiscal 2028 net income, up about 60% (CNBC).
Most stocks that sell off on "customer debt" worries are actually shrinking. NVIDIA is doubling.
The buyback: Jensen is voting with the checkbook
On September 28, NVIDIA added $150 billion to its share repurchase authorization, the largest increase in company history, bringing the remaining total to $235 billion to be used through fiscal 2028 (CNBC). It already spent about $20 billion on buybacks last quarter (Motley Fool).
Jensen Huang told Jim Cramer: "Buying back Nvidia stock is a tremendous opportunity." NVIDIA's buyback timing has historically been good: over 20 years, it has cut its share count by about 24% while the stock rose more than 40,000%. When a company that good at timing is buying, we pay attention. Fewer shares mean every dollar of that $385 billion is spread over a smaller pie.
The valuation math behind $240
CNBC puts NVIDIA's fiscal-2028 P/E at just 14.5, below every megacap peer except Micron, against a five-year average P/E of 62.9. That's the cheapest the stock has been, by that measure, in a decade.
Here's our back-of-the-envelope math. A roughly $5.16 trillion market cap at $214 implies about 24 billion shares. Spread $385 billion of expected fiscal-2028 net income across that, and you get roughly $16 per share, before the buyback shrinks the share count further. At just 15x those earnings, still a fraction of NVIDIA's historical multiple, the stock is worth about $240.
Our view: a solid $240 per share, about 12% above Friday's close, without needing the market to fall back in love with AI. It just needs to stop pricing the leader like a laggard.
The catalysts we've been writing about
- Earnings, Wednesday, November 18, 2026, after the close. See our Blackwell earnings preview.
- Sovereign AI. Jensen's European tour has nations lining up to build their own AI infrastructure. See NVIDIA and Sovereign AI.
- Orbit. SpaceX's plans for orbital data centers built around Vera Rubin, targeting late 2027 and 2028. See NVIDIA Heads to the Cosmos.
- Open-source AI and infrastructure financing. See the New World Land-Grab.
Each one is another reason demand for accelerated computing keeps broadening, and none of them shows up in a 14.5x multiple.
What could keep the ball on the floor
To be fair: Yahoo Finance flags that some AI customers carry heavy debt, and Seeking Alpha notes a jump in accounts receivable and lower free-cash-flow margins. Gross margins are under some pressure this half. A weak earnings guide or a deeper credit scare in AI cloud providers could push the bounce out. Watch those on November 18.
The bottom line
NVIDIA is growing like a startup, earning like a monopoly, buying back stock like it means it, and trading like it's already peaked. We don't think it has. The ball's been dribbled to the floor. Big bounce incoming.
Sources & further reading
- CNBC: Stock market today live updates: CNBC calling the same bounce.
- CNBC: Nvidia's record buyback shows the stock is too cheap for Huang to resist: P/E, analyst estimates, Huang quote.
- CNBC: Nvidia is a "best in breed" stock on sale: $150B addition, $235B remaining, underperformance.
- Motley Fool: Nvidia spent $20 billion on buybacks last quarter: buyback history and quote data.
- Yahoo Finance: Nvidia trades far below its usual multiple: selloff cause, revenue, net income.
- Seeking Alpha: Deeply undervalued, but watch accounts receivable: risks.
Opinion and commentary, not financial advice. The $240 figure is our own estimate, not a guarantee. Stocks can fall further before they rise, so do your own research.