In the video clip below from a recent episode of The AI Investor Podcast from 24/7 Wall St., the team discusses why, despite its enormous market capitalization of $2.9 trillion and a remarkably successful stock run over the past few years, NVIDIA remains a compelling addition to our investment portfolio.
As one of the world’s largest companies—currently the third largest—the tech giant is a frequent topic of discussion in financial circles, often accompanied by hyperbolic predictions ranging from it being the next biggest bubble to becoming a $10 trillion company.
However, by focusing on tangible metrics, specifically the projected earnings of $4.50 per share in 2025, we find that NVIDIA is trading at about 25 times next year’s earnings at a price of $120 per share. This valuation is on the lower end of the 30-35x forward earnings multiple band observed among large tech companies, suggesting potential upside. The company’s valuations have come down across the board, making it an opportune time for strategic investment. The expectation is that NVIDIA will continue to drive strong growth rates, particularly as concerns about peak earnings begin to shift due to ongoing trends and excitement in the tech space.
As you hear, our investment strategy involves initiating a core holding in NVIDIA. This approach allows us flexibility to increase our position, especially if the stock price dips to around $100 per share, which would bring its valuation closer to market multiples with a P/E ratio of approximately 20-22x. We plan to be strategic and adaptable with our allocation, adjusting based on market trends and performance. In addition to NVIDIA, we are closely monitoring other industry peers such as Broadcom, Marvell, and AMD as potential additions to our portfolio.
While we acknowledge potential risks—such as reduced capital expenditures from major customers like Microsoft that could pressure NVIDIA’s earnings—we believe that the company’s position in the current market cycle and the ongoing demand for its products justify its inclusion. The anticipated Blackwell cycle with strong growth rates is expected to allow NVIDIA to perform well over the next year, making it a valuable asset in our diversified investment portfolio.
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