Nvidia Stock Has Underperformed the Semiconductor Sector in 2026. Will It Skyrocket in the Second Half?
Nvidia's stock has underperformed the semiconductor sector in early 2026 despite strong AI demand. The company is set to ship next-generation Vera Rubin chips, with a $1 trillion order pipeline and expected price increases boosting margins. Analysts project an 88% earnings growth for fiscal 2027. With a P/E ratio of 29 compared to the sector's 75, Nvidia is considered undervalued, suggesting potential for significant upside in the second half of the year.
It has been a frustrating year for Nvidia (NVDA +1.18%) investors, as the tech giant's shares have barely delivered any gains so far in 2026. The PHLX Semiconductor Sector index, for comparison, has registered remarkable gains of 79% this year.
However, it is difficult to justify Nvidia's underperformance in the first half of 2026. The company is on track to deliver better results this fiscal year, driven by the artificial intelligence (AI)-fueled demand for its chips. So, will the market give Nvidia enough credit for its impressive financial performance and help the stock rally in the second half of 2026?
Let's find out.
Image source: The Motley Fool.
Nvidia's Vera Rubin chips could be a catalyst for the stock
Nvidia is all set to begin shipments of its next-generation Vera Rubin processors this fall. The company recently noted that Vera Rubin chip systems are now in full production, and demand for these chips appears to be quite healthy. I say this because Nvidia noted earlier this year that it has a $1 trillion order pipeline for the Blackwell and Vera Rubin chip architectures for 2026 and 2027.
NASDAQ: NVDA
Key Data Points
That's a significant upgrade over the $500 billion worth of orders it was anticipating for 2025 and 2026. A nice chunk of those orders is likely to be for the Rubin processors. That's because Nvidia claims that Vera Rubin will deliver 10 times higher performance per watt over Blackwell systems, as reported by CNBC. So, it is easy to see why companies such as Meta Platforms, Anthropic, OpenAI, Amazon, Microsoft, and Google are poised to deploy these chips to run AI workloads in data centers.
What's more, Nvidia is expected to increase the price of Vera Rubin systems by 25%, according to market research and analysis firm The Futurum Group. So, Nvidia's margin profile could improve, leading to a stronger jump in earnings this year. What's worth noting is that Nvidia's earnings are predicted to increase by 88% in fiscal 2027 (which ends in January 2027) to $8.96 per share.
That would be a significant step-up from the 60% earnings growth Nvidia delivered in fiscal 2026. IDC forecasts that the semiconductor industry's revenue could jump by 53% in 2026 to $1.29 trillion. Nvidia, meanwhile, could witness an 82% jump in revenue this fiscal year to $392 billion. So, there is a likelihood that Nvidia's earnings will grow faster than the overall semiconductor market this year. After all, its top-line growth is poised to outpace the industry, and a potential increase in the price of its Vera Rubin systems could lead to a larger increase in earnings than analysts project.
This is precisely why buying Nvidia could prove a smart move after its poor performance in the first half of 2026.
The stock is too cheap to ignore right now
With a price-to-earnings ratio of 29, Nvidia stock is an absolute bargain right now. The iShares Semiconductor ETF, which tracks and invests in semiconductor companies, trades at a much more expensive 75 times earnings. This cheap valuation could pave the way for a strong bull run in Nvidia in the second half of the year.
Assuming it trades at even 40 times earnings by the end of the fiscal year and clocks $8.96 in earnings per share, Nvidia's stock price could jump to $358. That's a potential upside of 85%, which is why it would be a good idea to buy this AI stock before it starts rallying in the second half of 2026.
