Nvidia grapples with 50% P/E discount, could return $26B-$51B in dividends
Analysts note Nvidia trades at a nearly 50% discount on 2026-27 P/E versus peers and recommend boosting dividends to 0.5%-1% through a $26-51 billion capital return. Alphabet’s raised AI infrastructure capex to $180-190 billion for 2026 is projected to drive higher Nvidia data center chip sales.
1. P/E Discount and Dividend Proposal
Nvidia currently trades at 26x 2026 and 19x 2027 earnings estimates, roughly a 50% discount to its Magnificent Seven peers, which average 49x and 41.5x respectively. Analysts argue that lifting the dividend yield from 0.02% to 0.5%-1% by allocating $26-51 billion—15%-30% of projected 2026 free cash flow—could broaden its shareholder base and narrow the valuation gap.
2. Free Cash Flow Comparison
Nvidia is expected to generate over $400 billion in free cash flow across 2026-27, comparable to Apple and Microsoft combined. Despite this, the company has returned just 47% of FCF through dividends and buybacks over the past three years, well below the roughly 80% peer average and its own 2013-22 rate of 82%.
3. Alphabet’s AI Capex and Data Center Demand
Alphabet raised its AI infrastructure spending guidance to $180-190 billion for 2026, with further increases expected in 2027. This surge in capex is projected to boost demand for Nvidia’s GPUs and data center processors, underpinning continued revenue growth in its core AI segment.