Some truths in life are undeniable – the sun rises in the east, honesty is the best policy, and Nvidia (NASDAQ:NVDA) will always beat its quarterly revenue and earnings projections.
The dominant AI chipmaker released its Q4 2025 earnings this week, once again surpassing analyst expectations. Revenues of $39.3 billion and an EPS of $0.89 comfortably exceeded the expected $38.12 billion in revenue and $0.85 in EPS.
Despite the banger of a quarter, investor A.J. Button remains cautious about Nvidia’s valuation, noting, “I still think Nvidia is a hold, a stock that does not pose great risks to its shareholders, but is too pricey to make for a very interesting long.”
Of course, Button is not ignoring the fantastic numbers, and the investor acknowledges that Nvidia continues to produce phenomenal revenues and profits. Still, Button points out that with a Price-to-Sales ratio of 24.8, a Price-to-Earnings of 44, and a Price-to-Free Cash Flow of 53.14, even the most bullish investors have to acknowledge – NVDA stock isn’t cheap.
With growth likely to decelerate next year, the investor questions whether Nvidia will be able to “grow into” its valuation. Needless to say, Button has his doubts.
Another worry for the investor is the rising ratio of the company’s account receivables to sales, which has been declining over the past few years. Button explains that this metric reflects the amount of the company’s revenue that remains outstanding. NVDA’s has expanded from 0.103 in 2015 to 0.155 today.
“Nvidia’s rising AR/sales ratio is an area of concern. Some reported revenue might end up not being collected if NVDA’s customers experience financial stress,” notes the investor.
Beyond the numbers, there are plenty of reasons to be positive about Nvidia, explains Button, citing the company’s CUDA software that creates both high switching costs and network effects. However, the investor adds, there are alternatives to Nvidia that could negatively impact the robust growth story, such as competition from AMD and a start-up called Cerebras.
“Its stock is clearly priced for all this success, and it’s hard to say whether the company can keep up its success into 2026 and beyond,” concludes Button. “I’d prefer to simply sit this one out.”
The investor is therefore assigning a Hold (i.e. Neutral) rating for NVDA. (To watch Button’s track record, click here)
Wall Street, however, isn’t nearly as hesitant. With 38 Buy recommendations and just 3 Holds, NVDA boasts a Strong Buy consensus. Analysts see an upside of ~51% over the next year, with a 12-month price target of $178.66. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.