Is NVIDIA expensive? Wall Street: Not at all, this is a once-in-a-lifetime opportunity for a generation!
Bank of America stated that NVIDIA's PEG ratio is lower than its peers, making its valuation still attractive. It is expected that by 2027, its P/E ratio will decrease to 24 times; Goldman Sachs believes that NVIDIA's valuation is close to the median P/E ratio of the past three years, and compared to its peers, its historical valuation is relatively low
Since the beginning of this year, NVIDIA's stock price has risen by nearly 190% cumulatively. With a forward P/E ratio of over 40 times in the next 12 months, the discussion on Wall Street about whether its valuation is "too expensive" has been ongoing.
Recently, Bank of America analysts Vivek Arya and Duksan Jang stated that buying NVIDIA is "a once-in-a-generation opportunity," believing that NVIDIA's valuation remains attractive. This is because its 25-year PEG ratio (P/E ratio/compound annual growth rate of earnings per share) is only 0.6 times, much lower than the average of 1.9 times for other companies in the Mag 7.
Goldman Sachs also mentioned that NVIDIA's pricing is reasonable, with its valuation close to the median P/E ratio of the past three years. Compared to its peers, its historical valuation is relatively low.
Bank of America and Goldman Sachs: Bullish on NVIDIA's Future
According to Bank of America, the bank's continued optimism about NVIDIA mainly stems from the following driving factors:
(1) Recent industry events (TSMC performance, AMD AI events, conferences with Broadcom, Micron Technology, and other industry giants, the speed of large language model releases, comments on top-tier mega-cap companies' capital expenditures, and NVDA management's "crazy Blackwell demand");
(2) NVIDIA's corporate partnerships (Accenture, ServiceNow, Oracle, etc.) and undervalued software products (NIM services);
(3) The ability to generate $200 billion in free cash flow (FCF) in the next two years.
Specifically, earlier this month, NVIDIA CEO Jensen Huang stated in a media interview that NVIDIA's Blackwell architecture chips have been "fully put into production," with insane demand for Blackwell (chips), boosting market optimism.
Mid-month, AMD launched a new product targeting NVIDIA's Blackwell architecture chips, but the stock price still closed sharply lower.
Yesterday, TSMC announced strong performance in the third quarter and raised its full-year revenue guidance to 30%, stating that AI demand is real, overall chip demand is stabilizing, and beginning to improve.
Driven by the above factors, Bank of America expects NVIDIA's EPS for the 25-26 fiscal year to continue to rise by 13%-20% and **has raised NVIDIA's target price to $190, implying a 37.7% upside potential from its closing price on Friday **
Bank of America also expects that by 2027, NVIDIA's earnings per share will increase to more than five times the original level, reaching $5.67. By then, the price-earnings ratio will decrease to a more moderate 24 times.
Goldman Sachs believes that, from a fundamental perspective, NVIDIA is supported by the following favorable factors:
In terms of AI investment returns, NVIDIA has stated that large social media and e-commerce platform users have already seen significant returns on investment.
The launch of Blackwell and the ramp-up of production capacity are not only drivers of recent and medium-term revenue growth, but also drivers of expanding NVIDIA's competitive advantage.
With the model generator solving the high throughput and low latency issues, the demand for inference computing may grow exponentially, and NVIDIA is expected to be able to seize this growth opportunity.
NVIDIA's "moat" is strong, including a large user base, innovative capabilities in the chip and data center fields, and a strong and continuously growing software product portfolio.
The lead time for Blackwell GB200 products is approximately 12 months, making its data center business highly forward-looking.
Considering the current strong demand for AI, it is expected that NVIDIA's chip supply will remain tight in the foreseeable future.
Sovereign AI, autonomous driving cars, and humanoid robots are also important drivers of NVIDIA's current and future growth in the field of AI.
Goldman Sachs expects that based on the growth of Blackwell products, the revenue of this product will continue to increase as planned, reaching billions of dollars by the first quarter of next year, and further growth will occur after April