Nvidia, Amazon, and Microsoft Stocks Just Did Something for the First Time in at Least 5 Years. Here's What History Says Will Happen Next
Nvidia, Amazon, and Microsoft stocks have traded at five-year low P/E ratios despite record financial growth driven by AI. While investors fear slowing AI adoption, historical data suggests these valuations are disconnected from results. The article argues that strong earnings resilience will likely trigger a robust rebound in stock multiples, presenting a buying opportunity for investors.
The past few years have been boom-or-bust for some of the world's most recognizable names. The advent of artificial intelligence (AI) was a catalyst for companies at the forefront of the technology.
Nvidia (NVDA 3.23%) leads the field for the graphics processing units (GPUs) that run AI models in data centers. Amazon (AMZN +0.86%) used AI to increase efficiency across its business, while also offering AI models to customers of Amazon Web Services (AWS), its cloud infrastructure service. Microsoft (MSFT +1.53%) partnered with ChatGPT creator OpenAI early on, integrating generative AI tools across its vast business, while also offering AI tools and models to cloud customers. Moreover, these tech titans have ridden AI to market-beating returns in recent years.
However, this year has marked a turning point. Nvidia, Amazon, and Microsoft are each trailing the S&P 500 thus far in 2026 (as of this writing), with valuations falling to at least five-year lows in recent months. History is crystal clear about what happens next.
Image source: Getty Images.
Valuations disconnected from results
Despite delivering quarter after quarter of record-breaking results, Nvidia's valuation continues to tumble. The stock has a price-to-earnings (P/E) ratio of 31, near its lowest level since 2019. Yet its operating and financial results continue to accelerate.
For its fiscal 2027 first quarter (ended April 26), Nvidia generated record revenue, up 85% year over year and 20% quarter over quarter to $81.6 billion. This drove adjusted earnings per share (EPS) that soared 140% to $1.87. The results were driven by record data center revenue of $75 billion, up 92%. Management expects its growth spurt to continue, forecasting year-over-year revenue growth of 95% to $91 billion in Q2.
NASDAQ: NVDA
Key Data Points
Like Nvidia, Amazon is posting impressive numbers while its valuation remains compressed, with its P/E ratio falling to 25 this year (though it's rebounded slightly to 29). You'd have to go back to 2008 to find a lower multiple.
Yet Amazon’s results continue to impress. In Q1, revenue of $182 billion rose 17% year over year, while EPS of $2.78 jumped 75%. Perhaps more telling is the reacceleration of its cloud growth, as AWS revenue rose 28%.
Microsoft has also been generating strong growth, yet that growth isn't reflected in the company's current valuation. Its P/E ratio had fallen to 21 late last month, though it has rebounded slightly to 23. You'd have to go back to mid-2017 to find a multiple that low.
But its financial results tell a different story. In its fiscal 2026 third quarter (ended March 31), Microsoft generated revenue that climbed 18% year over year to $83 billion, while its diluted EPS of $4.27 grew 23%. Perhaps more importantly, its Azure Cloud revenue jumped 40%.
What's weighing on these industry leaders?
Nvidia, Amazon, and Microsoft are all facing the same headwinds. Investors are worried that AI adoption will slow and the gravy train will derail. While those concerns are certainly justified and bear watching, a look back can be instructional.
NVDA PE Ratio data by YCharts
In every prior instance in which these stocks' P/E ratios were compressed to this degree, each was followed by an equally robust rebound of its multiple after the companies demonstrated the resilience of their financial results. It's easy to understand why. Sentiment has a limited shelf life, and investors will ultimately rely on sales and profit growth as the primary gauges of a stock's trajectory.
To recap: Nvidia, Amazon, and Microsoft are currently selling for 31 times, 29 times, and 23 times earnings, respectively -- well below their historical averages. This gives savvy investors the opportunity to pick up shares at a discount before the market comes to its senses.
