Bernstein Says Nvidia Stock Is a Buy After Valuation Reset

Purchasing Nvidia at this time may be similar to requesting a dessert after a massive dinner, and as per the history this is a case when the most pleasant surprises sometimes arrive. However, Bernstein claims that the market has silently transformed its expectations and so the investors have seen this setup before, where they usually profited from it.

Nvidia’s stock still enjoys a high price tag attached to it, but the market has now come to certain ground. Nvidia’s price has gone up approximately 30% since the beginning of the year, but this stock still underperformed the whole SOX semiconductor index in 2025.

This disconnect is particularly interesting, since analysts have continued to raise their estimates of the company’s earnings. As per Bernstein, the market trends of price and fundamentals have diverged so much that Nvidia has experienced a considerable valuation reset, despite remaining in the middle of the global AI infrastructure spending.

Valuation Compression Transforms the Story

The stock price increase did not happen overnight, but step by step the markets were re-evaluating prices, hence the gap between performance and earnings built up. As price reduction continues, Nvidia’s potential future economic performance is already reflected in the company’s stock price.

According to Bernstein, Nvidia’s forward PE ratio has decreased by roughly 27% this year and is now just below 25 times. That number alone might not signal a deal, but it is all about context. A forward PE of 25 for Nvidia puts the stock in the 11th percentile of its valuation over the last ten years, which is an area that is historically bright for the coming returns.

On the other hand, Nvidia’s relative value appears even better and it looks much more affordable. Bernstein comments that the stock is currently trading with approximately a 13% discount over the SOX index, which brings it to the first percentile of relative valuation.

During the previous decade, the times Nvidia’s stock was comparatively cheaper than the SOX were only thirteen days, which makes the current conditions as very uncommon.

History Favors the Buyers

The historical performance is probably the most striking data point in this scenario. Bernstein learned that buying Nvidia with a valuation of less than 25 times the forward earnings in the last ten years gave an average one-year return of over 150%, and there were no instances of negative drawdowns.

Ongoing issues related to AI capex cycles and GPU competition are very much acknowledged by the firm, but it still argues that the spending intentions are intact and the overall risk-reward profile is giving a favorable angle.

Analyst Outlook Remains Bullish

Bernstein came back with the same Outperform rating and kept the same target price of $275, viewing the present valuation as a chance rather than a warning.

They considered that Nvidia’s previous multiple compression had more impact on reducing the risk rather than on the company’s long-term growth potential being reduced.

Nvidia may still appear expensive when it is not compared with others, but history is against the skeptics, as it is such occasions where patience tends to be rewarded. The stock, having gone through valuation changes, with the earnings sustaining their upward movement, and the AI demand still very high, is again in the same situation.

It is uncomfortable for the skeptics, but it is historically rewarding for the buyers who are willing to remain data-driven.