This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
I have asked around my circles and can’t seem to get a straight answer on why Nvidia’s (NVDA) stock looks so cheaply valued on a price-to-earnings multiple basis.
So, I am coming to you for answers — drop them to me on X @BrianSozzi. What am I missing with Nvidia? Let’s discuss!
I caution this is not me suggesting a Nvidia buying spree heading into earnings on Feb. 26. Yahoo Finance isn’t a stock trading platform or investment bank. We are in the context game as it pertains to investing.
This is just a general callout that the market may have a flaw in how it’s valuing Nvidia.
Nvidia is among the most cheaply valued AI stocks at the moment, if you can wrap your head around that one!
On a forward price-to-earnings multiple basis, Yahoo Finance data shows Nvidia trading at 31 times. Broadcom (AVGO) and Marvell Technology (MRVL) are valued at 35 times and 41 times, respectively. Arm Holdings (ARM) clocks in at 76 times.
Listen: What Bill Gates thinks of Nvidia’s CEO
At close: February 21 at 4:00:01 PM EST
Zoom out further, and Nvidia’s stock is trading at a discount to several other “Magnificent Seven” members.
Tesla’s (TSLA) stock is trading at 121 times forward earnings. Amazon (AMZN) trades at 36 times.
There are two reasons for this odd valuation level on Nvidia, the former analyst in me posits.
One, the Street is underbaking its forward estimates on Nvidia’s earnings power.
Yahoo Finance data shows Nvidia’s first quarter earnings per share (EPS) trend has drifted modestly lower over the past 30 days. The Street has also not pushed up its 2025 EPS estimates on Nvidia for more than 60 days.
I find this bizarre.
Despite China-based DeepSeek rocking the super-bullish AI thesis earlier this year, Wall Street still sees Nvidia profiting from the global buildout of AI infrastructure. Aggressive 2025 capital expenditures assumptions by hyperscalers such as Amazon (AMZN) and Meta (META) shared during this earnings season underscore the point.
“Over the coming decades, the investment [in artificial intelligence] is happening,” Russell Investments chief investment officer Kate El-Hillow told me on Yahoo Finance’s Opening Bid podcast (video above).
Then the other possible explanation is with EPS estimates not rising, Nvidia’s stock price is in wait-and-see mode. While the stock has rallied hard off the February DeepSeek lows, it has still underperformed the S&P 500 (^GSPC) this year. Shares are down from early November 2024 highs.
