Despite holding a commanding market position, Nvidia appears surprisingly cheap on a valuation multiple basis. Its forward P/E ratio for the upcoming fiscal year stands at roughly 15x. Why is the market assigning such a modest multiple to a company experiencing exponential growth? The answer lies in how markets price equities: investors look far beyond the next fiscal year, discounting cash flows that extend deep into the future.

It is clear that curently demand in the chip market exceeds supply. Nvidia holds approximately 80% market share in the data center segment and enjoys abnormally high margins. At the moment, there is FOMO in the AI arms race; investments are being made regardless of immediate ROI because market participants, especially hyperscalers, must remain in the race. But it would be naive to think that such a favorable situation for Nvidia will last for decades. A large part of Nvidia's key customers are developing their own chips or seeking other options to reduce their dependence on Nvidia. But who will benefit from this?

The most direct competitor to Nvidia's AI chips is Advanced Micro Devices (AMD). AMD's estimated market share is only 5-7%, but it is expected to reach 10-20% over the next 5 years. As the initial growth phase of AI infrastructure wanes, more and more buyers will move from expensive Nvidia silicon toward more specific and cheaper solutions.

Regarding custom-made chips tailored for technology companies, the most important partner at the moment is Broadcom (AVGO), which is also forecasted to see rapid growth of nearly 60% over the next 3 years. From 2027 onwards, its main customers are OpenAI and Anthropic, who are ordering large quantities of custom-tailored AI chips.

Recent financial results confirm that the AI investment cycle is far from over, in fact, it continues to accelerate. While Nvidia currently holds near-total supremacy, its major clients are aggressively seeking alternatives and investing in custom silicon. Nevertheless, the market has already begun pricing in this long-term normalization, leaving Nvidia stock trading at a surprisingly reasonable valuation today.