MW Nvidia's stock has been 'brutalized.' Here's the big disconnect.
By Emily Bary
Investors appear worried about the health of AI spending. But big AI customers don't seem hesitant, an analyst notes.
Can Nvidia Corp.'s "brutalized" stock turn things around?
Shares of Nvidia $(NVDA)$ - and Broadcom Inc. $(AVGO)$ for that matter - "are looking attractive for those who can wait out the noise," Bernstein analyst Stacy Rasgon wrote late Monday. He noted a disconnect between investor jitters over artificial-intelligence spending and what major hyperscale customers are actually saying.
While investors appear worried, "the companies actually doing that spending still seem to be anything but," Rasgon added. He said Nvidia shares trade at an attractive valuation of 20 times earnings per share estimates for the next 12 months. That constitutes "trough levels amid a demand environment that continues to march upward," in his view.
Read: Apple and Nvidia led Monday's $750 billion tech wreck. How to play the aftermath.
Broadcom, meanwhile, looks poised to ramp its application-specific integrated circuits in the second half of this year, all while the company's software business is becoming more of a contributor.
Nvidia and Broadcom shares are each off about 20% so far this year.
See also: Nvidia's stock is cheap by this metric. Can next week's GTC get it going again?
What about chip stocks not typically categorized as AI winners? Rasgon recommended taking a look at Qualcomm Inc. $(QCOM)$, which does stand to benefit from AI as more applications move onto people's devices. The stock has managed to eke out a fractional year-to-date gain even as Apple Inc., a major modem customer, has gotten into the modem game itself. That "bolsters the view" that the Apple risk "is well-known, and hopefully already priced [in]" to Qualcomm's stock, Rasgon wrote.
And while investors have been warming to analog stocks after a tough few years for those businesses, Rasgon wrote that he's "not ready to call the bottom in analogs just yet." He said he's worried about the industrial market if a U.S. recession begins "and auto is cracking, with valuations still very high."
Further, Rasgon said he isn't prepared to pound the table on shares of Advanced Micro Devices Inc. $(AMD)$ or Intel Corp. $(INTC)$, both of which he has market-perform ratings on. He didn't see a case for owning AMD's stock given its "limited AI story." And while Intel's stock has been active this year on takeover hopes, Rasgon said he and his team "don't really feel like trading Intel for a transaction or [another] strategic reason."
-Emily Bary
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March 11, 2025 09:22 ET (13:22 GMT)
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