NVIDIA's stock has underperformed the broader market in recent months, but according to Bernstein, the chipmaker at the heart of the AI trade is now trading at a rare discount relative to the Philadelphia Stock Exchange Semiconductor Index.
The stock recently traded at around 25 times forward earnings per share. Analyst Stacy Rasgon noted in a report that for NVIDIA, a 25x forward P/E ratio places its valuation in the 11th percentile of its 10-year historical range, making it relatively cheap in absolute terms.
Compared to the Philadelphia Semiconductor Index, NVIDIA is currently trading at a roughly 13% discount, landing in the 1st percentile. In fact, over the past decade, there have been only 13 trading days where NVIDIA's valuation relative to the index was cheaper than it is now.
Rasgon added that historical trends suggest this valuation level represents a strong buying opportunity. Over the past 10 years, investors who bought NVIDIA at below 25x earnings saw substantial returns, with an average one-year gain exceeding 150%—and no drawdowns during those holding periods.
Over the past six months, NVIDIA has risen 21%, lagging behind the Philadelphia Semiconductor Index's nearly 32% gain.
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