What I'm writing today will likely spark some disagreement. In my view, NVIDIA (NVDA) is more cheaply valued on the stock market than Nike (NKE). Yes, you read that right. Building on my original NVDA trade thesis, I've opened a longer-term long trade on NVDA stock.

What a contrast. The performance gap between NVIDIA and Nike tells its own story. The AI titan's stock is comfortably in the green for the year so far. The sneaker dinosaur, meanwhile, has lost over 40%. NVDA trades only about 7% below its all-time high of $236.54, reached in May 2026. At current prices, that puts the company's market cap at around $5.3 trillion, the largest in the world. And where does NKE stand by comparison? Its record dates back years, to early November 2021, at $179.10. At the current level of around $36, that's a drop of roughly 80%. That collapse has made Nike look cheap, with a market cap of around $54 billion. Its P/CF ratio currently sits at 17.4, below the historical average of 23. Some see that as a value opportunity. I see it differently.

Nike is, for me, a good example of why the level of a valuation multiple alone isn't enough. It has to match growth expectations. A logic the PEG ratio captures: a P/CF ratio above the expected growth rate is more expensive than the raw number suggests. And that's exactly where it gets sobering for Nike. Looking at the average market expectations for operating cash flow, the average growth rate over the next 3 years comes in at around 11.5%, and that expected growth keeps slowing sharply over the coming years. Against that backdrop, the P/CF ratio looks far less attractive. At least to me. Even if I calculate a P/CF ratio based on the higher estimates for the coming years, it only drops to 13.5, still above the expected growth. On top of that, I currently don't see any catalysts that would meaningfully speed up the sneaker maker's cash flow.

The situation looks entirely different for NVIDIA. Its P/CF ratio currently sits at around 33, almost double Nike's. On its face, that looks expensive. But put that P/CF ratio in relation to the growth rate and calculate the PEG ratio, and you get a value of around 0.5, a far cheaper picture than the raw P/CF number suggests.

Against the enormous growth rates for the next 3 years, averaging nearly 70%, the P/CF ratio is put into serious perspective, even accounting for the fact that this momentum is expected to slow in the coming years too, according to market forecasts. Even so, the P/CF ratio remains below the expected growth projections. That's where I see room for further share price gains, reflecting the positive business environment and NVIDIA's unique market position. Based on expectations for fiscal year 2028/29, the P/CF ratio drops to just 10.3, lower than Nike's. That makes NVIDIA stock the real value investment here.

Why I still don't consider it an investment for me, and what fundamental opportunities I do see, I laid out in more detail here. Back then, I had decided against buying. Cheap doesn't mean risk-free. But on the world's biggest company, a PEG ratio of just 0.5 was enough to get me back in, this time with a longer-term long trade using options, where my maximum loss is capped at position opening.

Is NVIDIA a buy? On valuation alone, NVIDIA looks more attractive than Nike right now. Its P/CF ratio of 33 implies a PEG ratio of around 0.5, well below Nike's, and that multiple drops to just 10.3 based on fiscal 2028/29 estimates. The biggest risk is that a large share of NVIDIA's expected growth still has to materialize over the next several years, which is exactly why I'm treating this as a trade, not a long-term investment.

Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. I am not a financial advisor. Always do your own research before making any investment decision.

Disclosure: I may hold direct or indirect positions (including options) in any securities mentioned in this newsletter. My opinions are my own and always honest.