A top analyst just called Nvidia underpriced even as its $5 trillion valuation stuns Wall Street. But the price target lands below consensus and regulatory risks are mounting for the AI chip giant
For the past two years, Wall Street bulls have justified Nvidia's extraordinary rise by pointing to profits that match its soaring share price. Now, a new analyst call has disrupted this narrative: Piper Sandler has initiated coverage of Nvidia with an "overweight" rating and a $300 price target, contending that the world's most valuable chipmaker remains undervalued-even though this target is below the average forecast from other major banks.
Nvidia repurchased about 94 million shares for roughly $19.7 billion during the quarter, while cash dividends totaled about $6.0 billion.
Valuation math meets AI reality
Nvidia's recent financial results are striking. For the quarter ending July 26, the company reported $96.2 billion in revenue-an increase of 106% year-over-year-driven by $89 billion in data center sales and a gross margin steady at 75%. Adjusted earnings for the quarter reached $2.22 per share, nearly half of the company's total for all of fiscal 2026. Nvidia returned $26 billion to shareholders through buybacks and dividends, with $99 billion still authorized for future repurchases.
Despite these gains, Nvidia's share price has largely kept pace with its profit growth, rather than outstripping it. This dynamic leads some analysts to still consider the stock "cheap" even at a $5 trillion market capitalization. Piper Sandler's approach is notable for its restraint: it does not inflate the earnings multiple, even as it anticipates sustained AI demand and Nvidia's continued sector leadership.
How the new target stacks up
Piper Sandler's $300 price target is approximately 34% above Nvidia's previous close, but it remains below the $327 average among analysts and does not reach BMO Capital's $340 or Wedbush's $250-$340 range. JPMorgan, meanwhile, recently set its target at $265 for the remainder of 2026. The divergence is not only numerical but methodological: while some banks justify higher targets by raising the multiple, Piper Sandler's call is grounded in a lower valuation, reflecting a belief that the market will not always pay a premium for growth.
The latest analyst debate over Nvidia is set against a Wall Street average price target of around $327, with published targets spanning from roughly $220 to $515-a spread that highlights the unusually wide range of expectations for Nvidia's AI-driven profits.
Regulatory friction enters the equation
As Piper Sandler's note was released, Nvidia encountered a new regulatory challenge that is rarely factored into analyst models. The Justice Department is investigating whether Nvidia's $20 billion licensing deal with AI chip startup Groq was structured to avoid antitrust review. The agreement brought Groq's inference chip technology and several key executives, including its founder, to Nvidia without a formal acquisition. According to Bloomberg, the DOJ has issued a formal request for information, and the investigation remains ongoing. Nvidia shares declined about 1% following the news.
While officials do not currently expect the deal to be reversed, the underlying risk is structural. Should regulators determine that Nvidia's pattern of licensing, hiring, and minority investments requires merger review, the company's ability to integrate new AI capabilities could be constrained. Piper Sandler's optimistic growth forecast assumes Nvidia can continue converting demand into revenue at its current rate-an assumption that regulatory intervention could challenge, even if customer demand persists.
What's at stake for investors
Nvidia has projected $108 billion in revenue for the current quarter, representing a sequential increase of nearly $12 billion. The upcoming report, expected in November, will test whether the company can continue to justify even a conservative earnings multiple. At present, investors face a paradox: the world's most valuable company is being called underpriced by a Wall Street bull, yet that bull's target is lower than the prevailing consensus.
For those investing in AI's future, the central risk is not whether Nvidia can sustain growth, but whether the market will continue to reward that growth at current valuation levels. As confirmed in Nvidia investor reporting, the company's data center segment alone generated $89 billion in the most recent quarter, highlighting the scale of AI infrastructure demand.
For perspective, the S&P 500's average price-to-earnings ratio was 21.5 as of August 2026, with the technology sector trading at a premium near 29. Nvidia's valuation reflects both its rapid earnings growth and the market's willingness to pay for AI leadership, but any change in sentiment or regulatory approach could quickly alter this balance.
Valuing a company like Nvidia requires more than tracking headline growth. Investors must consider not only the rate of revenue expansion, but also the sustainability of profit margins, the strength of competitive advantages, and the possibility that regulatory or market forces could affect future returns. In high-growth sectors, even small adjustments to assumptions about valuation multiples or regulatory risk can shift price targets by billions of dollars. This is why disciplined valuation-rather than pursuing the highest forecast-remains essential protection against the next market reversal.
