Many Nvidia investors are now using the term “cheap” to describe a stock that has tripled in less than a year, which is quite surprising.
According to investment strategist Alec Young, the company’s shares have been trading within a $100 range since the summer, staying relatively flat after reaching almost $500 in August. However, with profit estimates still on the rise, Nvidia’s price compared to expected earnings has dropped to its lowest point since mid-2022.
Young stated, “The stock is actually very cheap,” noting that its price-to-earnings ratio is less than the company’s estimated growth rate, which is quite unusual.
Michael Sansoterra, chief investment officer at Silvant Capital Management, also sees Nvidia as undervalued. “It’s growing decidedly faster than the great majority of other companies,” he said. “It’s relatively inexpensive.”
Despite this, many investors question Nvidia’s valuation due to its dependency on future profits in a highly cyclical industry. The stock is priced around 35 times sales, making it the most expensive stock in the S&P 500 by far.
Ark Investment Management’s Cathie Wood stated that Nvidia is an expensive way to play the artificial intelligence trade, prompting her firm to sell Nvidia shares in recent months. Others, like Robert Arnott, see Nvidia as a potential bubble that’s “priced beyond perfection.”
Nvidia is set to release its earnings on Nov. 21, and many are eager to hear the company’s comments regarding China, where the US has tightened restrictions on sales of advanced semiconductors.
Despite this, many analysts and investors still see a robust growth outlook for Nvidia. However, any signs of a slowdown would cause trouble for the stock, warned David Klink, a senior equity analyst at Huntington Private Bank.
Big Tech’s profit outlook is another reason it will outperform small caps, presenting a strong outlook for the tech-heavy Nasdaq 100 compared to the small cap Russell 2000.
- Microsoft Corp. has restored access to OpenAI’s popular ChatGPT chatbot after it was temporarily unavailable to employees.
- Trade Desk Inc. plummeted as much as 31% in extended trading Thursday after giving a weak revenue forecast for the current quarter.
- Walt Disney Co. delayed several film releases following the settlement of an industrywide contract dispute with striking actors.
- Taiwan Semiconductor Manufacturing Co. posted its first monthly sales gain since February.
- Semiconductor Manufacturing International Corp. warned that hoped-for smartphone market recovery is another year out, compounded by geopolitical tensions leading to a serious glut in global chipmaking capacity.
Earnings on Friday
—With assistance from Subrat Patnaik and Sagarika Jaisinghani.
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