Nvidia is currently trading at the lowest it’s been since 2019, before the AI wave took over. In less than 2 months, Nvidia has lost close to $1 trillion in market value, as we see investors worry about the future of AI or rotate to memory chip companies like Sandisk and Micron.
According to Bank of America, there are a number of concerns igniting the Nvidia sell off. Some investors seem to be unhappy with the company’s use of cash in vendor financing as opposed to stronger buybacks and dividends.
Others are concerned with the gross margin pressure of the company as higher memory costs infiltrates the tech sector. Growing competition in the ASIC space also plagues investors.
Bank of America still holds Nvidia as a buy as company analyst Vivek Arya said, “Our analysis suggests that at Nvidia’s current valuation, investors might already be implicitly discounting an unjustified ~30-35% headwind to 2027 and 2028 EPS estimates (effectively delta between Nvidia and growth peer forward PE).”
He further goes on to say, “We strongly disagree with the EPS discount and see it as an enhanced Buy opportunity for a unique, durable growth franchise now trading at a seven-year low 18x forward PE.”
Nvidia is an absolute Buy here, and just like every other earnings report it will beat earnings and raise guidance. This is a significant discount.
