A few weeks ago, Nvidia (NASDAQ: NVDA) CEO Jensen Huang told investors that his chip empire has built an order book of $1 trillion through 2027. This jaw-dropping revelation crystallizes the scale of artificial intelligence (AI) infrastructure demand in a single headline.

For a company that once survived each passing quarter on graphics cards and gaming services, this backlog figure is a tectonic shift -- providing multiyear revenue visibility that dwarfs even the most rock-solid balance sheets.

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The natural question smart investors are asking is whether the market has already discounted Nvidia's windfall or if the stock still offers compelling upside.

Nvidia's backlog isn't just a waiting list -- a figure of this magnitude comes with contractual commitments from AI's most influential developers. Hyperscalers, cloud providers, and sovereign governments are eagerly lining up with billions of dollars today for GPUs and data center equipment that will be delivered over the next 12 to 24 months.

These dynamics mitigate risk to Nvidia's top line in a way few competitors can dream. This level of demand transforms the AI growth story from "will infrastructure spend continue?" to "how fast can Nvidia ramp up production?"

What's even better is that its gross margin should stay juicy because these orders are already locked in at premium pricing. In essence, Nvidia's backlog converts AI hype into durable, high-margin runway well beyond the next earnings call.

Over the last few months, Wall Street has been fretting over rising capital expenditure (capex) budgets from big tech. Worries that returns on AI infrastructure build-outs might disappoint could force an unwanted pause on the otherwise unrelenting AI rocket ship.

In my eyes, Nvidia's $1 trillion backlog should rebut these fears. When Microsoft, Alphabet, Amazon, and Meta make commitments at this scale, they are attached to a confidence that the return on accelerating investment across AI training and inference will materialize.

This level of visibility should temper the anxieties of AI capex skeptics as it reinforces the broader narrative that AI infrastructure is not a fleeting sprint, but rather a multiyear, multitrillion-dollar build-out.

Each incremental dollar spent on chips should look less risky as Nvidia's backlog validates the secular tailwinds fueling legitimate, sticky AI demand. The virtuous cycle featuring chips, models, and applications becomes less theoretical and more inevitable as Nvidia's order book grows.

Nvidia trades at a forward price-to-earnings (P/E) multiple of roughly 22 -- near its lowest throughout the AI revolution. The question is whether this multiple has room to rebound and expand once investors consider the quantified demand of the company's backlog.

While analyst models already assume optimistic revenue growth over the next couple of years, the $1 trillion figure exceeds even the most aggressive forecasts. If Nvidia is able to fulfill custom orders without major disruptions to its supply chain, then the implied growth rate in today's share price could prove conservative.

In a world where tech valuations heavily index on storylines and assumptions, Nvidia's order book represents a compelling narrative with the receipts. For investors who see the AI infrastructure era still in its early innings, Nvidia's latest news tilts the risk/reward profile more in favor of upside opportunity rather than overvaluation. Nvidia isn't just riding the AI wave anymore -- the company has become a full-blown water park that has already been paid for.

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Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Jensen Huang Just Raised Nvidia's Order Outlook to $1 Trillion. Should You Buy the AI Stock -- or Has the Market Already Priced It in? was originally published by The Motley Fool