Key Highlights

  • Nvidia (NASDAQ:NVDA) trades at about 27 times trailing earnings, according to a Motley Fool commentary published on Tuesday, October 20, 2026, which describes the shares as the cheapest in seven years.
  • The multiple compressed as the chip index fell for eight straight sessions, its longest losing streak in 16 years, including a 3.8% drop on Friday, October 16 and 11.4% on the week.
  • Dip buyers returned on Monday, October 19, when the VanEck Semiconductor ETF (NASDAQ:SMH) gained about 3%, but Nasdaq-100 futures slipped again before the open on Tuesday.
  • The 27 times figure is one publication's calculation on trailing earnings, and forward multiples depend on estimates that may move as the AI financing debate develops.

A Seven-Year Low in the Multiple

Nvidia (NASDAQ:NVDA) designs the graphics processors that dominate AI training and inference, and its valuation has become a test of the AI trade. A Motley Fool commentary on Tuesday, October 20, 2026 put the shares at about 27 times trailing earnings and argued that the stock has not been this cheap in seven years. The reset followed a broad semiconductor sell-off. The chip index fell 3.8% on Friday, October 16 and 11.4% over the week, its worst week since April 2025, as reported by AP. That marked an eighth straight daily decline. The Nasdaq Composite fell 2.1% that Friday, its worst week since June, as investors questioned the debt funding AI data centres. Chips rebounded on Monday before futures slipped again on Tuesday.

How a Falling Price Meets Rising Earnings

A trailing price to earnings ratio divides the share price by the last four quarters of earnings per share. It falls when the price drops or when reported earnings grow faster than the price, and for Nvidia (NASDAQ:NVDA) both forces have been at work. The other pressure is the discount rate. The 10-year Treasury yield briefly topped 5.3% after hot inflation data on October 16 and stood near 5.11% on October 20. At 27 times, the earnings yield, the inverse of the multiple, is about 3.7%, simple arithmetic on the published ratio. That sits below the 10-year yield, so the valuation still assumes strong earnings growth. A low multiple on past earnings is therefore not the same as a low multiple on future earnings.

Risks and What to Watch

The main risk is that trailing earnings overstate the future if AI customers slow orders. Debt-funded buyers are under strain: CoreWeave (NASDAQ:CRWV), a large buyer of Nvidia systems, carries more than USD 51 billion in debt and obligations, and its 2032 bonds yield about 14.9%. A second risk is rates, since fading but not absent hike odds keep the discount rate high. A third is contagion from Asia, where SK Hynix fell 4.2% on Tuesday. Investors should watch Meta Platforms (NASDAQ:META) results on Wednesday, October 21, the Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) reports on Wednesday, October 28 and the Federal Reserve decision at the end of its meeting on Tuesday, October 27 and Wednesday, October 28.

Where Things Stand

The answer is that the price has fallen faster than earnings while bond yields have climbed, compressing the multiple to about 27 times past profits for Nvidia (NASDAQ:NVDA). Whether that is cheap depends on the next year of AI spending, not the last one. The next catalysts are Meta's capex update on Wednesday, October 21, the Fed decision on Wednesday, October 28 and the megacap cloud reports the same day. Valuation multiples describe the past rather than forecast the future, and this is not investment advice.