Nvidia (NVDA) stock is hovering near its year-to-date high after the artificial intelligence darling reported blockbuster financials for its second quarter, yet legendary investor Michael Burry says NVDA is 'wildly undervalued' on paper at a forward price-earnings multiple of about 24x.

Market Context

Following the post-earnings rally, Nvidia shares are up more than 20% versus the start of this year. The semiconductor giant reported second-quarter results that handily beat Wall Street estimates, with revenue more than doubling on a year-over-year basis. The company guided for roughly $108 billion in revenue for the current quarter, exceeding consensus expectations by a wide margin and reinforcing its position as the dominant supplier of AI computing infrastructure.

Analysis

Burry's bullish view on Nvidia's valuation is rooted in what he describes as a striking mismatch between the titan's earnings growth and the multiple investors are paying for it. For a company that continues to grow at an 'exceptional' pace and dominates the AI chip market, Nvidia's current P/E ratio actually represents a significant discount to peers, he argued in his latest Substack post. The Big Short investor noted that historical seasonal patterns make NVDA even more attractive in the near term, pointing out that Nvidia has a history of closing both September and October in the green.

Despite acknowledging the apparent bargain, Burry remains cautious on Nvidia shares. His own theoretical value for the company is 'much lower' than its current market cap, reflecting concerns that the giant's extraordinary margins and competitive advantage may not last indefinitely. He believes NVDA's AI chip monopoly could prove shorter-lived than investors expect, which would eventually pressure earnings.

Burry also questioned Nvidia's aggressive investments and financing arrangements, warning that capital spending and efforts to expand the ecosystem could ultimately weigh on shareholder returns. Notably, he maintains massive short and put exposure against Nvidia while buying December call options only as a hedge against an earnings-driven rally, suggesting his net positioning remains bearish despite acknowledging the valuation disconnect.

Key Numbers

- Forward P/E multiple: approximately 24x

- Q2 revenue growth year-over-year: more than 100%

- Current quarter guidance: roughly $108 billion in revenue

- Year-to-date share price performance: up more than 20%

What to Watch

Traders should monitor whether Nvidia can sustain its earnings beat streak into the December options expiration. Key levels to watch include the year-to-date high as resistance and the forward P/E multiple of 24x as a valuation anchor. Upcoming catalysts include quarterly revenue reporting cycles and any developments in competitive landscape that could threaten NVDA's AI chip dominance.

Burry's dual positioning—acknowledging undervaluation while maintaining net bearish exposure through derivatives—highlights the tension between value and momentum in NVDA shares. Market participants should watch whether the stock's seasonal patterns hold or if competitive pressures begin to materialize faster than the market anticipates.