Is Nvidia still cheap on the stock market?
By:TradingView
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It is the technology sector that has enabled a new record for the S&P 500 despite the complex geopolitical situation, Hormuz, and the price of oil. With the AI revolution, the semiconductor industry is outperforming everything in the stock market, and AI CAPEX continues to break all records. This underlying dynamic could continue for a long time given how strong profit expectations are and how valuations remain under control.
This is precisely the question investors are asking: after the vertical rebound in April of the semiconductor sector in the stock market, is it still time to take positions? In other words, are the leaders of this sector still cheap in terms of stock market valuation despite new record highs in prices?
Let’s start from the beginning with a chart showing Japanese candlesticks on monthly, weekly, and daily data for the SOX, the semiconductor index in the stock market. The vertical rebound since the beginning of April is impressive.
Let’s take things step by step: the dominant sector is technology. Within the technology sector, it is the semiconductor segment that dominates with the artificial intelligence revolution and the massive global construction of data centers. Demand is equally massive for Nvidia’s AI GPUs, and profit outlooks therefore remain very favorable.
With prices returning to all-time highs, is Nvidia stock now too expensive from a fundamental standpoint? The best way to answer this question is to look at valuation and the forward Price Earnings Ratio. That is, the ratio between Nvidia’s stock price and expected profits over the next 12 months.
The table below shows the ranking of the US semiconductor sector based on forward PE.
Good news: Nvidia stock is not expensive based on forward PE, even though the stock is at its all-time high. Indeed, with a forward PE of only 17, Nvidia stock is generally cheaper than the average of the S&P 500 and clearly among the cheapest stocks in the semiconductor sector.
Conclusion: Nvidia, the global leader in AI GPUs and the global leader in the semiconductor sector, remains broadly undervalued in the stock market relative to its financial earnings outlook. Therefore, short-term pullbacks should be seen as technical opportunities in line with the underlying bullish trend.
This is precisely the question investors are asking: after the vertical rebound in April of the semiconductor sector in the stock market, is it still time to take positions? In other words, are the leaders of this sector still cheap in terms of stock market valuation despite new record highs in prices?
Let’s start from the beginning with a chart showing Japanese candlesticks on monthly, weekly, and daily data for the SOX, the semiconductor index in the stock market. The vertical rebound since the beginning of April is impressive.
Let’s take things step by step: the dominant sector is technology. Within the technology sector, it is the semiconductor segment that dominates with the artificial intelligence revolution and the massive global construction of data centers. Demand is equally massive for Nvidia’s AI GPUs, and profit outlooks therefore remain very favorable.
With prices returning to all-time highs, is Nvidia stock now too expensive from a fundamental standpoint? The best way to answer this question is to look at valuation and the forward Price Earnings Ratio. That is, the ratio between Nvidia’s stock price and expected profits over the next 12 months.
The table below shows the ranking of the US semiconductor sector based on forward PE.
Good news: Nvidia stock is not expensive based on forward PE, even though the stock is at its all-time high. Indeed, with a forward PE of only 17, Nvidia stock is generally cheaper than the average of the S&P 500 and clearly among the cheapest stocks in the semiconductor sector.
Conclusion: Nvidia, the global leader in AI GPUs and the global leader in the semiconductor sector, remains broadly undervalued in the stock market relative to its financial earnings outlook. Therefore, short-term pullbacks should be seen as technical opportunities in line with the underlying bullish trend.
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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