This article first appeared on GuruFocus.

Fundstrat's Tom Lee is staying firmly bullish on Nvidia (NASDAQ:NVDA), arguing that the AI chip leader remains inexpensive even after its post-earnings surge because profits and revenue expectations are rising faster than the stock's valuation multiple. That creates an unusual setup for investors: a megacap stock delivering triple-digit growth while its earnings multiple continues to compress.

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The thing that stands out is that Nvidia's multiple is still very low. So, they've got these huge revisions. The stock hasn't kept up. Now the P/E keeps contracting, Lee said in an interview with CNBC.

His argument gained fresh support from Nvidia's second-quarter results. Revenue surged 106% to $96.2 billion, while adjusted earnings per share climbed 111% to $2.22. Data Center revenue reached $89 billion, up 117%, underscoring the continuing strength of AI infrastructure spending. Nvidia guided for roughly $108 billion of third-quarter revenue.

Shares jumped 8.7% Thursday after the results and stronger long-term outlook helped ease fears that AI spending was approaching a peak.

Fundstrat called Nvidia's more than 100% revenue growth just astounding, while Lee said Nvidia will aid a rally in AI complex.

The bigger valuation catalyst may be further out. Nvidia expects revenue to grow roughly 70% in fiscal 2028, substantially above the growth Wall Street had been modeling, as demand remains constrained by available supply rather than customers. Fundstrat said earlier this week, Nvidia's 2028 revenue guide might help the stock push back to new all-time highs.

Lee's bullish case now depends on Nvidia converting extraordinary demand into earnings quickly enough to keep its valuation from expanding.

Investors should watch fiscal 2028 revenue growth, Data Center sales and gross margins. Nvidia's 75% second-quarter margin faces pressure from rising memory costs, while supply constraints could limit how much demand the company can actually fulfill.

If earnings estimates continue climbing faster than Nvidia's share price, Lee's inexpensive argument becomes stronger. Slower AI spending, margin compression or weaker-than-expected growth as comparisons become tougher would undermine the thesis.