Nvidia, the chipmaker whose stock became synonymous with the artificial intelligence boom, is now trading at a discount to its estimated worth, according to a new analysis from Morningstar. The investment research firm says shares of the Santa Clara, California-based company have cooled enough in 2026 that they no longer reflect the strength of its underlying business.
The report, published on Morningstar’s website, argues that Nvidia’s share price has lagged behind its earnings growth and its dominant position in AI computing hardware, creating what the firm characterizes as a rare buying opportunity for a stock that spent much of the past three years trading at a premium.
From Market Darling to Bargain Bin
Nvidia’s rise over the past several years has been one of the defining stories of the AI era. The company’s graphics processing units, originally built for video games, became the essential building blocks of the large language models powering chatbots, image generators, and enterprise AI tools. That demand pushed Nvidia’s market capitalization past several trillion-dollar milestones and made it, at various points, the most valuable public company in the world.
But 2026 has been rockier. Investors have grown more cautious about how quickly AI spending by cloud giants like Microsoft, Amazon, Google, and Meta can keep expanding, and whether that spending will translate into profits for the companies buying the chips. Concerns about a potential AI spending slowdown, tighter U.S. export restrictions on advanced chips sold to China, and rising competition have all weighed on the stock at different points this year.
Morningstar’s analysts contend that these worries have outpaced the actual deterioration in Nvidia’s business. The firm’s fair value estimate for the stock sits meaningfully above its recent trading price, implying the market is pricing in more pessimism than the fundamentals currently justify.
What’s Still Driving Demand
Despite the volatility, the core demand drivers behind Nvidia’s business have not disappeared. Data center operators continue to build out massive AI computing clusters, and Nvidia’s newest chip architectures, including successors to its Blackwell platform, remain in high demand from major cloud providers and AI labs. The company has also continued expanding into new revenue streams, including networking hardware and software tools designed to keep customers within its ecosystem.
Analysts note that Nvidia’s gross margins, historically among the highest in the semiconductor industry, have held up even as competitors try to chip away at its market share. That pricing power, combined with a backlog of orders from hyperscale cloud companies, underpins much of the bullish case in Morningstar’s report.
The Risks Keeping Investors Cautious
Still, the case for caution has not vanished. Nvidia’s business remains concentrated among a small number of enormous customers, meaning any pullback in AI infrastructure spending by a single major buyer could have an outsized effect on results. Export restrictions tied to U.S.-China trade tensions have already forced Nvidia to redesign chips for the Chinese market and have cut into sales there in recent years.
Competition is also intensifying. Rivals including AMD have pushed to close the gap in AI accelerator performance, while several of Nvidia’s biggest customers, including Google, Amazon, and Microsoft, have developed their own custom AI chips to reduce reliance on outside suppliers. If that trend accelerates, it could slow Nvidia’s growth rate even if overall AI spending keeps rising.
Morningstar’s analysis frames the recent pullback as a sentiment-driven disconnect rather than a sign of fundamental weakness, though it acknowledges the stock’s dependence on continued AI infrastructure spending.
What It Means for Investors
For long-term investors, the Morningstar report offers a reminder that even the market’s most closely watched stocks can drift below their intrinsic value during periods of broader uncertainty. Nvidia’s swing from being viewed as an expensive, unstoppable growth story to a company now flagged as undervalued illustrates how quickly narratives can shift in a sector as volatile as AI hardware.
Whether the gap between price and value closes will likely depend on upcoming earnings reports, continued signals from cloud providers about their AI capital spending plans, and any further changes to export policy affecting chip sales abroad. For now, Morningstar’s take adds to a broader debate on Wall Street about whether the AI trade still has room to run, or whether the easy gains have already been made.
Nvidia is expected to provide more clarity on demand trends in its next quarterly earnings report, which investors and analysts will scrutinize for signs of whether the current pullback reflects a temporary reset or a more lasting shift in how the market values AI infrastructure companies.
