Despite Nvidia's market cap of around $4.5 trillion and persistent question marks surrounding the longevity of the AI hype cycle, some analysts have suggested that Nvidia's stock is currently a bargain. With a trailing price-to-earnings ratio of just under 40, Nvidia is priced only marginally higher than most of the so-called "Magnificent 7", with Tesla the obvious outlier thanks to a valuation that defies logic.
What distinguishes Nvidia from the rest of the Mag 7 pack is its current growth trajectory, however. While the other companies saw revenue growth between -2.9 percent (Tesla) and 22.2 percent (Meta) in the past 12 months, Nvidia's revenue grew 65.5 percent - and it's actually accelerating. Moreover, with a gross margin of more than 70 percent, Nvidia is operating at a level of profitability that its peers can only dream of.
When looking at forward earnings, Nvidia's stock looks even more attractive. At about 22 times forward earnings, Nvidia's is priced barely above the S&P 500 average despite its revenue growth being the third fastest in the index and its profitability being outstanding too. So in conclusion, yes, Nvidia does indeed look "cheap" at the moment, but that is only if you believe that AI will live up to its promise, and that the tech giants currently fueling Nvidia's growth by investing hundreds of billion in AI infrastructure annually will continue to do so.
