DBS CIO: Nvidia (NVDA.US) has a forecast P/E ratio of only 17, AI tech stocks are far from bubble territory
The price-to-earnings ratio of NVIDIA (NVDA.US) and its projected 70% earnings growth next year indicate that AI-driven tech stocks are far from entering bubble territory.
According to Jinse Finance APP, Hou Wey Fook, Chief Investment Officer of DBS Group, stated that the price-to-earnings ratio of Nvidia (NVDA.US) and its expected 70% earnings growth rate next year indicate that AI-driven tech stocks are far from entering a bubble zone.
Data shows that Nvidia's current stock price is about 17 times its expected earnings for the next 12 months. Hou compared this valuation to Cisco (CSCO.US) having a 100x valuation before the internet bubble burst.
“If the benchmark enterprise of AI trading is valued at only a dozen times earnings, how can it be considered a bubble?” he said in an interview, adding that the current momentum in semiconductors and AI remains favorable.
However, Hou still advocates adopting a "barbell" strategy to "control the overall volatility of the portfolio": combining growth tech stocks with investment-grade fixed income products to achieve stable returns, while using hedge funds and gold as intermediate risk diversification tools.
From a market performance perspective, Nvidia's share price reached a new all-time high during Friday's trading session, just one step away from becoming the world's first publicly listed company to surpass a market value of 6 trillion USD. According to media reports, Nvidia and SoftBank have respectively completed the final 10 billion USD investment in the latest round of OpenAI financing, fulfilling their respective 30 billion USD investment commitments. In addition, weaker-than-expected US non-farm payroll data for September led the market to lower bets on a Federal Reserve rate hike in October, boosting the overall strength of tech stocks and further driving Nvidia's share price up.
Nvidia is up about 25% so far this year, with a current market value of approximately 5.6 trillion USD.
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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