Nvidia's $6 Trillion Valuation: Why the Chip Giant Remains the Safest Bet in the AI Arms Race

Nvidia is approaching a $6 trillion market cap and consolidating its position as the world’s most valuable company. The chipmaker is up 25 per cent year-to-date as of October 8, and a strong earnings season could fuel further growth. But Anthropic’s $2 trillion IPO, dubbed the ‘most ridiculous’ of the year, a higher for longer rate environment and high profile warnings from investors like Ray Dalio and Michael Burry have markets on guard against a potential AI bubble event. It’s in this context that investors are looking at Nvidia’s colossal valuation and beginning to ask serious questions about whether the company can deliver the revenues and the growth required to justify the price tag. But with a price-to-earnings ratio of around 30, Nvidia is not far off the market average, and this for a company whose products hold the promise of delivering a Fourth Industrial Revolution. If those promises hold, and AI realises its potential as a global game-changer, then Nvidia, as a first-mover and market leader, may be the best-placed to capitalise. That’s according to the CEO of the deVere Group, Nigel Green, who said he continues to see upside potential for Nvidia, and said that amidst AI mania, it stood out as one of the candidates he would personally back. In a message to investors on Thursday, the finance chief said that belief in AI should not automatically translate to belief in every pioneer or proponent of the technology. Instead, Green says, the AI arms race will produce winners and losers, and that the spoils will be disproportionately enjoyed by a small number of successful firms, while others fall by the wayside. He expressed scepticism over Anthropic’s putative valuation, but said Nvidia was doing a lot more to instil confidence: “Anthropic is going for a valuation of $2 trillion, in a move that has been called ‘the most ridiculous IPO of 2026’. Analysts at New Construct say that the value of Anthropic should be measured in the billions, not the trillions. “A number of paid-for Claude features that used to require monthly subscriptions are now free to all users. Well, can Anthropic be worth $2 trillion if it has to give its product away? Of course it can’t. “But if you think that AI is going to be a success, as I do, should you buy shares in Anthropic? Well, I would put it to you that if you want to bet on AI succeeding, there’s one company best-placed to make some serious money, and in my opinion, it’s Nvidia.” Is Nvidia a Buy Ahead of Earnings? Nvidia is set to “dominate” earnings season, according to analysis by ZeroHedge, with the chipmaker, alongside Micron, collectively expected to account for over a third of earnings per share growth in the S&P 500. A strong earnings beat could be the catalyst which sends Nvidia on the next leg up, with investors waiting to see if the firm remains on track to reach its optimistic revenue forecasts. And according to Barron’s, which named Nvidia a top pick in May, the fourth quarter is historically Nvidia’s best , with the firm “recording an average fourth-quarter gain of 22% in data going back to 1999.” Even as Nvidia approaches $6 trillion in market cap, it remains underpriced relative to a mean of price targets . Of 72 analyst targets aggregated by CNN Business, 96 per cent said Nvidia was a “buy” and just 1 said the stock was a “sell”. The median price target was $320 per share, an implied potential upside of 35 per cent on today’s prices (October 8), with a high-end target of $720 per share. In September, analysts at Morningstar issued a fair value estimate of $310 per share for the stock, and gave it a four star rating, following its Q3 earnings report which revealed a “stunning” revenue growth forecast which called for a 70 per cent increase in 2028, writing that: “We raise our fair value estimate for wide-moat Nvidia to $310 from $280 as demand for Nvidia’s industry-leading AI gear will likely be higher for longer. Shares rose 4% on the news but still appear undervalued to us, as the market appears sceptical about future AI spending.” Nvidia Stock Forecast: Is the AI Chipmaker Overvalued at $6 Trillion? The bull case for Nvidia is built on the firm’s ability to beat analyst expectations time and again. Nvidia’s revenue jumped 106 per cent year-on-year to $96.2 billion in its second quarter, and the company has guided for around $108 billion in the current quarter. Its trailing P/E of around 30 compares with 25.7 for the S&P 500 as a whole, FactSet data shows . However, there are a number of downside risks to the outlook, as well as challenges for Nvidia to overcome, not least as its competition becomes ever more fierce. FactSet expects S&P 500 earnings to rise 29.5 per cent in the third quarter, and calculates that stripping out semiconductor stocks would cut the tech sector’s growth rate from 65 per cent to 24.4 per cent. That has made chips a crowded bet. “Long global semiconductors” was the most crowded trade in Bank of America’s September fund manager survey, cited by 53 per cent of respondents , while 42 per cent named AI hyperscaler spending as the most likely source of a credit event. Those concerns have grown louder this week . Ray Dalio told the Forbes Global CEO Conference in Singapore on Wednesday that AI is a classic bubble nearing its bursting point, telling attendees that: “We’re in the part of the cycle that is before that but approaching that,”. He pointed to the debt being raised to fund AI, and warned that the bubble starts to burst once interest rates keep climbing. On Thursday, the IPO of Firmus Grid, an Australian data centre operator backed by Nvidia, struggled to attract enough investor support . KKR estimates that the global AI build-out will need $8 trillion of capital, Bloomberg noted, and Nvidia’s sales depend on that money continuing to flow. Competition is another pressure point. JPMorgan analyst Harlan Sur said in August that “NVDA will maintain market leadership in AI compute”, but expects custom chips to close the gap on its GPUs, with their shares of the market likely to “trend towards parity over the next several years”. However, despite the risks, analysts remain firmly in Nvidia’s corner, and its November results will be the next test. Investors will be watching its guidance, and the health of its biggest customers, as closely as the headline numbers. Strong numbers could be the catalyst that sends Nvidia even higher – a disappointment could precipitate a correction and renewed AI bubble fears.