NVIDIA (NVDA) 'struggles' in antitrust trap...lowest price level in 10 years

▲ NVIDIA (NVIDIA, NVDA), US Stock Market, Semiconductor Stocks/AI Generated Image

NVIDIA (Nvidia, NVDA), the leading AI stock, has entered a historically undervalued phase, with its price-to-earnings ratio falling to its lowest level in over a decade.

According to the financial media outlet StockTwits on September 23 (local time), NVIDIA's stock price has fallen by 15% to trade around $117 after hitting an all-time high in June 2024. As the stock correction coincided with rapid earnings growth, its 12-month forward price-to-earnings ratio dropped below 28x, marking the lowest figure since 2014. Considering that the average over the past five years exceeded 40x, the stock's valuation burden has significantly decreased.

However, external uncertainties continue to hinder a stock price rebound, keeping investors cautious. Above all, news of the U.S. Department of Justice (DOJ) initiating an antitrust investigation and issuing subpoenas acted as strong downward pressure. Concerns that the U.S. government might further tighten export controls on advanced semiconductors to China are also cited as major negative factors. Adding to this, news that the launch of Blackwell, the next-generation AI chip, is being delayed due to design flaws has further fueled market anxiety.

Major Wall Street investment banks are evaluating the recent correction as a buying opportunity and are raising their target prices. Bank of America (BAC) analyzed that the Blackwell production delay issue is entering a resolution phase and set a target price of $165. Jefferies also maintained a "Buy" rating and a target price of $150, stating that NVIDIA's next-generation product shipments will get back on track.

NVIDIA demonstrated strong fundamentals, surpassing market expectations with second-quarter revenue of $30.04 billion and adjusted earnings per share of $0.68. The key determinant for future stock price movements will be whether the lowest stock valuation in a decade and robust earnings growth can overcome regulatory pressures and production delay concerns.

[Key Article Summary]

-NVIDIA's stock underwent a 15% correction from its all-time high, causing its 12-month forward price-to-earnings ratio to fall below 28x, its lowest in over a decade.

-The U.S. Department of Justice's antitrust investigation, concerns about export regulations to China, and delays in the production of the next-generation AI chip Blackwell are cited as obstacles to a stock price rebound.

-Major Wall Street investment banks have upgraded their target prices, analyzing the current situation as a buying opportunity based on solid earnings and the resolution of production delays.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*