Analyst sees Nvidia 42% undervalued before May 20 earnings
Key insights
- A Wall Street analyst set a Nvidia price target implying 42% upside despite the stock already hitting a $6 trillion market cap.
- Options traders are pricing a 7.5% implied move around May 20 earnings, more than double Nvidia's historical median swing.
- Nvidia stock rose roughly 20% between early May and the analyst's bullish call, yet the thesis still projects significant undervaluation.
Why this matters
Nvidia's earnings on May 20 will function as a real-time stress test of hyperscaler AI capex commitments, giving the market its clearest read yet on whether infrastructure buildout is sustaining or plateauing in 2026. A stock at $6 trillion market cap pricing in another 42% gain means the AI infrastructure investment thesis now requires the company to grow into valuations that would have seemed implausible for any hardware company two years ago. For AI founders and technical leaders, the implied move pricing reveals that even sophisticated options markets cannot agree on Nvidia's near-term trajectory, which has direct downstream effects on GPU allocation pricing, cloud compute costs, and the fundraising narratives tied to AI infrastructure scarcity.
Summary
Nvidia's stock has already surged 20% since early May, yet at least one Wall Street analyst argues the market is still dramatically underpricing the company's AI infrastructure opportunity, issuing a price target that implies another 42% upside from current levels.
The bullish call lands four days before Nvidia's fiscal Q1 2027 earnings on May 20, a report that options markets are treating as a high-stakes event. Traders are pricing in a 7.5% implied move in either direction, more than double the historical median swing, suggesting unusually wide disagreement about what hyperscaler capex data will show up in the numbers.
Essentially: (Nvidia, Wall Street analysts) are running two separate debates simultaneously, one about whether AI infrastructure spending is accelerating, and another about whether Nvidia's current $6 trillion market cap already reflects that answer.
- The analyst's 42% undervaluation thesis rests on AI infrastructure demand, not near-term earnings beats.
- Options pricing at 7.5% implied move signals the earnings call itself is expected to move markets materially.
- Nvidia has reached a $6 trillion market cap, making any percentage-point swing one of the largest absolute-value moves in market history.
At this scale, a single earnings print can shift more market value in a day than most sectors are worth in total.
Potential risks and opportunities
Risks
- If Nvidia's May 20 earnings miss on data center revenue or guidance, a 7.5% downside move on a $6 trillion cap erases roughly $450 billion in market value in a single session, triggering forced selling across AI-linked ETFs and tech funds.
- Analysts with bullish price targets set before the print face credibility pressure if hyperscaler customers (Microsoft, Google, Amazon) signal any capex moderation on the earnings call, potentially prompting a wave of target cuts that amplifies the downside.
- Retail investors who entered on the 20% May run-up, attracted by the 42% undervaluation narrative, face outsized losses relative to institutional holders if the implied move resolves to the downside and liquidity thins post-open.
Opportunities
- Volatility sellers and options market makers can extract premium from the elevated 7.5% implied move if realized volatility post-earnings comes in below that level, as it has historically for Nvidia.
- Competing AI chip vendors (AMD, Intel Gaudi, Groq) gain a narrow narrative window if Nvidia's earnings disappoint, allowing them to accelerate enterprise conversations around supply diversification while buyer attention is elevated.
- Cloud infrastructure startups and AI compute brokers (CoreWeave, Lambda Labs) could use a post-earnings Nvidia pullback to lock in longer-term GPU procurement contracts at more favorable rates before the next demand cycle tightens supply again.
What we don't know yet
- Which specific hyperscaler demand signals underpin the analyst's 42% undervaluation model, and how sensitive is the target to any single customer's capex revision?
- Whether the 7.5% implied options move reflects genuine earnings uncertainty or is inflated by short-dated hedging activity tied to the May 20 date specifically.
- How Nvidia's guidance for fiscal Q2 2027 will address potential export control impacts on datacenter GPU shipments to restricted markets, a variable absent from the analyst's public framing.
Originally reported by fool.com
Read the original article →Original headline: Wall Street Analyst Says Nvidia Still 42% Undervalued Ahead of May 20 Earnings Despite Record $6T Market Cap