Nvidia’s slide sends valuation back to pre-AI boom levels
The selloff has Nvidia, not long ago the hottest stock on Wall Street, trading at 18 times earnings projected over the next 12 months, according to data compiled by Bloomberg. The last time the shares were this inexpensive was early 2019. To get a sense of how dramatically it has fallen off, the erstwhile market leader is now cheaper than the S&P 500 Index, which is priced above 20 times forward earnings, and the technology-heavy Nasdaq 100 Index, which is at almost 23 times.
Nvidia’s shrinking valuation isn’t the result of a deteriorating outlook. On the contrary, Wall Street analysts have been raising their profit estimates for the coming quarters. Instead, the selloff shows how much the AI trade is shifting to other areas, such as memory and storage stocks like Micron Technology. Even Nvidia rivals such as Advanced Micro Devices and Intel have seen their share prices double or even triple this year.
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“Sentiment has moved on,” said Michael Bailey, director of research at Fulton Breakefield Broenniman. “You’re seeing these companies where expectations were very low – the Microns of the world – stealing the spotlight.”
Nvidia is expected to deliver the fourth-fastest revenue growth in the the S&P 500 this year, but it’s still cheaper than about half of the stocks in the index, according to data compiled by Bloomberg. Considering how steady Nvidia’s revenue growth and profitability have proven to be, the company looks undervalued at current levels, believe Randy Hare, director of equity research at Huntington Bank.”Stocks follow earnings,” said Hare, who’s betting Nvidia shares will resume their climb in the coming months. “It’s a consistent performer.”
