The Puzzling Case of Nvidia's Valuation
Nvidia's stock appears to be undervalued at 31 times forward price-to-earnings multiple, compared to peers like Broadcom (35 times) and Arm Holdings (76 times). The company's earnings power has been subject to downward revisions over the past month, with analysts' estimates for 2025 EPS modestly lower. Despite aggressive capital expenditure assumptions from hyperscalers, Nvidia's stock price remains in a wait-and-see mode.
- One possible explanation for this undervaluation is that Wall Street is being overly cautious in its forward estimates for Nvidia's earnings power, potentially due to concerns about the company's ability to maintain market share in emerging AI technologies.
- What role are investors playing in perpetuating this valuation disconnect, and how might their behavior influence the stock price in the coming months?