What Bubble? Nvidia Profits Are Rising Even More Than Its Stock

tech.hindustantimes.com:

 Nvidia Corp.'s blowout earnings report lifted shares and assured the market that artificial intelligence mania is still going strong. It might also make the stock look cheaper.

All eyes were on the chipmaker's guidance for signs about the strength of the AI market, and Nvidia didn't disappoint. With the numbers now in, bulls are swiftly calculating the stock's new price-to-earnings ratio, or how much investors are paying for future growth.

“Some investors have been scared to buy because they think the stock is too expensive, but that's been a huge mistake,” said James Demmert, chief investment officer at Main Street Research. “Every time it reports, the P/E shrinks because the E ends up being so much stronger than people expect.”

Put another way, Nvidia's earnings have been growing even faster than the stock. 

Nvidia has seen its valuation slide since the middle of 2023, even amid a record-breaking rally for the shares, because of its massive earnings growth. In the fiscal fourth quarter, the chipmaker reported a whopping 486% year-over-year growth in earnings per share excluding certain items, with the $5.16 figure handily beating analyst estimates of $4.60. Its forecast for first quarter revenue of about $24 billion was also a big beat.

The numbers mean Wall Street estimates are set to be revised higher, which will likely bring down the valuation once again if the share price doesn't keep pace. The stock jumped as much as 14% at market open, hitting a record intraday high. 

While some investors have been concerned about a possible bubble forming around AI-related stocks, others noted that Nvidia is still less expensive than peers. The stock trades at about 32 times forward earnings, compared with rival Advanced Micro Devices Inc. at 45 times. The shares are also cheaper than those of Amazon.com Inc. and Microsoft Corp., while the Nasdaq 100 Index trades at a 25 times multiple.

“Nvidia continues to be one of the cheapest AI-oriented stocks even after its year-to-date run