Nvidia Corporation (NASDAQ:NVDA) is reportedly in early discussions to acquire Reflection AI or make a larger investment in the startup, according to the Financial Times. Reflection AI develops open-weight AI models. NVDA has already invested $800 million in the company. While talks are still early, they raise another question for investors: Is Nvidia stock itself too cheap? Nvidia remains at the center of the AI boom, but ranks only 3rd in our list of Top 10 Co-Packaged Optics (CPO) Stocks to Buy in 2026.
A Deal That Could Take Many Forms
Several deal structures are possible, including a full acquisition or an acqui-hire that brings in staff and licenses technology. The latter could avoid the regulatory review associated with a full acquisition. Nvidia could also increase its equity stake or supply chips and computing power. Reflection AI was last valued at $25 billion in March.
CEO Jensen Huang has called for an open-weight AI ecosystem. Broader adoption of AI models could also increase demand for NVDA chips. But the discussions are still in their early stages; the terms are unclear, and there is no guarantee the companies will reach an agreement. Nvidia’s AI ambitions have caught investors’ attention, but it’s not the only growth stock on billionaires’ radar. See which 10 stocks made the list, including NVDA.
Is Nvidia Undervalued?
Nvidia’s forward P/E has fallen to 24.62x, about 42% below its five-year average of 42.13x. That discount stands out for a company whose EPS is forecast to climb 95.23% this fiscal year and another 70.90% next year.
But the question is, why the discount? The lower multiple mostly reflects earnings growing faster than the share price, which sits near its 52-week high. One explanation may be the longer-term outlook. EPS growth is expected to slow to 21.70% by fiscal 2030, and the market may already be reflecting that slowdown in today’s valuation. The current discount could be excessive if the slowdown proves less damaging than the market expects.
Nvidia also has the cash to pursue a deal. A full acquisition of Reflection AI at its last $25 billion valuation (a pre-money figure, so a deal would likely carry a premium, though Nvidia already owns a stake) would amount to roughly 40% of the company’s $62.47 billion cash balance. I see the lower multiple as a possible opportunity for long-term investors. But the main risk is that earnings growth slows more than anticipated.
The number of hedge funds holding Nvidia climbed from 275 at the end of Q1 2026 to 285 at the end of Q2 2026. Meanwhile, short interest remained low at 1.27% of float as of September 15, 2026.
The Reflection talks could be manageable for the chipmaker, though a full acquisition would use a larger share of its cash, and it could strengthen its broader AI ecosystem. With the stock trading at a low multiple and hedge fund interest rising, patient investors may still have room to benefit.
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