While Nvidia (NASDAQ: NVDA) stock hasn’t done much recently, the chip giant’s revenues and profits have continued to boom and earnings forecasts have continued to rise. As a result, its price-to-earnings (P/E) ratio – an important valuation metric – has fallen to 16.5 using next year’s earnings forecast.

Now, the last time Nvidia had a P/E ratio under 20 was over 10 years ago when it was mainly a video gaming hardware company (well before the AI boom). So could we potentially be looking at a once-in-a-decade buying opportunity here?

A deep value opportunity hiding in plain sight?

I actually think that we might be looking at a major buying opportunity to consider right now. To my mind, the chip stock looks too cheap at present.

Going back to the valuation, Wall Street expects Nvidia to generate earnings per share of $8.19 for the financial year ending 31 January 2027 (that would represent growth of 72% on the $4.77 figure posted for the financial year just ended) and $10.90 the following year. So at today’s share price of $180, that gives us P/E ratios of 22 and 16.5.

I don’t think these earnings multiples take into account the major long-term opportunity here. Because this company has a huge growth runway ahead.

Enormous growth potential

We know that Nvidia’s highly likely to see strong growth in the medium term. Because the hyperscalers (Amazon, Alphabet etc) have announced massive AI capital expenditure (capex) budgets this year.

Together, these companies plan to spend over $650bn on AI capex in 2026. Given that Nvidia has the best AI chips in the market (and a huge market share), a decent chunk of this capital is likely to find its way into its coffers.

I see this as just the beginning though. Because the AI story is still very much in its infancy today.

If you listen to Nvidia CEO Jensen Huang, he talks about how ‘physical AI’ is the next big thing. He’s referring to things like self-driving cars and humanoid robots, which are only just starting to emerge, and are likely to create high demand for AI chips in the future.

“The ChatGPT moment for robotics is here. Breakthroughs in physical AI – models that understand the real world, reason and plan actions – are unlocking entirely new applications.”

Jensen Huang, founder and CEO of Nvidia

Worth a closer look?

Of course, no one knows where the growth stock’s going in the short term. While the average analyst price target is $263 (about 45% above the current share price), there are risks that could lead to share price weakness.

One such risk is competition from rivals. While Nvidia dominates the AI chip market today, competitors such as AMD, Broadcom, Amazon, and Alphabet are beginning to have success with their own products.

Another risk is a possible tech sector market meltdown. Ultimately, we can’t rule out this kind of scenario. I should also point out that analysts’ forecasts can be off the mark at times. In other words, the earnings forecasts I mentioned above may not come to fruition.

Taking a five-year view however (our preferred investment horizon here at The Motley Fool), I reckon Nvidia stock will do well as the AI revolution gathers pace. So I think it’s worth a look today.