"Nvidia ( NASDAQ:NVDA) has been really making a lot of big-league deals in AI that have captured the attention of Wall Street of late. Undoubtedly, the Nvidia-OpenAI investment and partnership is the big one that's sparked significant excitement as well as a considerable amount of skepticism by some who think that AI deals are getting a tad "circular," causing some to compare the current AI boom to the events that fuelled the dot-com boom and its eventual bust."
"At the time of this writing, Nvidia shares trade at just shy of 30 times forward price-to-earnings (P/E), not exactly a multiple that screams bubble, especially when you consider the real, profitable growth that you're getting from the GPU maker. Arguably, Nvidia stock looks cheap when you consider the firm is still growing at more than 50% despite being a nearly $4.4 billion behemoth."
Nvidia has completed multiple large AI deals, including a prominent investment and partnership with OpenAI, generating both excitement and skepticism about circular financing and dot-com comparisons. Nvidia shares trade near 30 times forward P/E, a level that does not necessarily indicate extreme overvaluation given current profitable growth and cash flows. The company is still expanding at over 50% despite its large scale, and the growth is translating into real cash. A sudden collapse in AI chip demand could cause a painful market correction, making it difficult to precisely measure froth among AI stocks. Market pricing appears fairly highly valued rather than clearly bubbly.
Read at 24/7 Wall St.
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