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These AI Stocks Have Fallen: Time to Buy NVDA, SMCI, AVGO?
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Large-cap technology stocks, particularly those associated with the AI trade, have faced considerable pressure over the last week or so, perhaps raising the eyebrows of many investors.
More specifically, beloved Nvidia (NVDA - Free Report) , Super Micro Computer (SMCI - Free Report) , and Broadcom (AVGO - Free Report) have all seen their shares dive, as we can see illustrated in the chart below that tracks performance from last Friday, June 21.
Image Source: Zacks Investment Research
The price action raises a valid question – is this a temporary blip, reflecting an opportunity for those waiting on the sidelines? Let’s take a closer look.
Nvidia’s Data Center Continues to Break Records
Nvidia’s Data Center sales have been a focal point amid the AI frenzy, which have shown unbelievable growth over the last year as companies race to scoop up chips. Concerning its latest period, Data Center revenue of $22.6 billion once again blew away our consensus estimate and reflected another quarterly record.
Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
The company’s unbelievable growth has also kept valuation multiples at historically sound levels, with the current 43.0X forward 12-month earnings multiple below the 50.7X five-year median and five-year highs of 106.3X.
It’s worth noting here that NVDA shares traded well above current valuation levels in 2020 and 2021, a time when the AI theme had yet to emerge fully.
Image Source: Zacks Investment Research
Despite the adverse price action, the positive story surrounding the stock remains the same. Analysts’ revisions remain positive across the board, keeping the company a Zacks Rank #1 (Strong Buy). Positive earnings estimate revisions paired with a sound valuation picture will help the stock regain its footing, and the recent dip looks to be an opportunity.
Image Source: Zacks Investment Research
Super Micro Computer Reclaims Key Level
Super Micro Computer shares have been notably hot in 2024, gaining nearly 200% and representing the top-performing S&P 500 stock. The company is a leading provider of application-optimized, high-performance server and storage solutions that address various computational-intensive workloads, explaining the robust demand being witnessed.
The company earnings picture remains bright, with revisions remaining steady over the last few weeks and reflecting notable bullishness from analysts overall. Growth is expected to remain robust, with consensus expectations for its current fiscal year suggesting 100% EPS growth on 110% higher sales.
Image Source: Zacks Investment Research
Shares trade at a 24.3X forward 12-month earnings multiple, showing a premium relative to historical levels but still reflecting a considerable discount from highs of 54.7X in 2024. The steeper multiple reflects investors' expectations, with the current 0.4X PEG ratio also sitting at a sound level.
Image Source: Zacks Investment Research
It’s worth noting that shares have reclaimed the 50-day moving average, a level that’s previously caused shares to face resistance recently.
Image Source: Zacks Investment Research
Broadcom Posts Record AI Revenue
Broadcom is a global technology leader that designs, develops, and supplies semiconductor and infrastructure software solutions. The company’s recent set of quarterly results brought post-earnings fireworks, with record revenue from AI products of $3.1 billion pleasing investors.
Following the print, the company raised its current-year sales outlook, with free cash flow of $5.3 billion also jumping 18% year-over-year. AVGO has long been considered a cash-generating machine, allowing it to grow its dividend payouts consistently over the years.
Image Source: Zacks Investment Research
Analysts took note of the favorable quarter, raising their earnings outlooks accordingly across the board. Shares trade at a 28.9X forward 12-month earnings multiple, steeply above the five-year median but nicely beneath 2024 highs of 42.0X.
Image Source: Zacks Investment Research
Bottom Line
While several large-cap technology stocks involved with the AI trade have faced pressure over the last week, all three companies above – Nvidia (NVDA - Free Report) , Super Micro Computer (SMCI - Free Report) , and Broadcom (AVGO - Free Report) – continue to sport bullish earnings outlooks, with revisions remaining stable.
Nothing has fundamentally changed behind the story, with market participants likely taking profits after their strong runs. All remain bullish, with earnings estimate revisions confirming the positive business trends being witnessed.
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These AI Stocks Have Fallen: Time to Buy NVDA, SMCI, AVGO?
Large-cap technology stocks, particularly those associated with the AI trade, have faced considerable pressure over the last week or so, perhaps raising the eyebrows of many investors.
More specifically, beloved Nvidia (NVDA - Free Report) , Super Micro Computer (SMCI - Free Report) , and Broadcom (AVGO - Free Report) have all seen their shares dive, as we can see illustrated in the chart below that tracks performance from last Friday, June 21.
Image Source: Zacks Investment Research
The price action raises a valid question – is this a temporary blip, reflecting an opportunity for those waiting on the sidelines? Let’s take a closer look.
Nvidia’s Data Center Continues to Break Records
Nvidia’s Data Center sales have been a focal point amid the AI frenzy, which have shown unbelievable growth over the last year as companies race to scoop up chips. Concerning its latest period, Data Center revenue of $22.6 billion once again blew away our consensus estimate and reflected another quarterly record.
Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
The company’s unbelievable growth has also kept valuation multiples at historically sound levels, with the current 43.0X forward 12-month earnings multiple below the 50.7X five-year median and five-year highs of 106.3X.
It’s worth noting here that NVDA shares traded well above current valuation levels in 2020 and 2021, a time when the AI theme had yet to emerge fully.
Image Source: Zacks Investment Research
Despite the adverse price action, the positive story surrounding the stock remains the same. Analysts’ revisions remain positive across the board, keeping the company a Zacks Rank #1 (Strong Buy). Positive earnings estimate revisions paired with a sound valuation picture will help the stock regain its footing, and the recent dip looks to be an opportunity.
Image Source: Zacks Investment Research
Super Micro Computer Reclaims Key Level
Super Micro Computer shares have been notably hot in 2024, gaining nearly 200% and representing the top-performing S&P 500 stock. The company is a leading provider of application-optimized, high-performance server and storage solutions that address various computational-intensive workloads, explaining the robust demand being witnessed.
The company earnings picture remains bright, with revisions remaining steady over the last few weeks and reflecting notable bullishness from analysts overall. Growth is expected to remain robust, with consensus expectations for its current fiscal year suggesting 100% EPS growth on 110% higher sales.
Image Source: Zacks Investment Research
Shares trade at a 24.3X forward 12-month earnings multiple, showing a premium relative to historical levels but still reflecting a considerable discount from highs of 54.7X in 2024. The steeper multiple reflects investors' expectations, with the current 0.4X PEG ratio also sitting at a sound level.
Image Source: Zacks Investment Research
It’s worth noting that shares have reclaimed the 50-day moving average, a level that’s previously caused shares to face resistance recently.
Image Source: Zacks Investment Research
Broadcom Posts Record AI Revenue
Broadcom is a global technology leader that designs, develops, and supplies semiconductor and infrastructure software solutions. The company’s recent set of quarterly results brought post-earnings fireworks, with record revenue from AI products of $3.1 billion pleasing investors.
Following the print, the company raised its current-year sales outlook, with free cash flow of $5.3 billion also jumping 18% year-over-year. AVGO has long been considered a cash-generating machine, allowing it to grow its dividend payouts consistently over the years.
Image Source: Zacks Investment Research
Analysts took note of the favorable quarter, raising their earnings outlooks accordingly across the board. Shares trade at a 28.9X forward 12-month earnings multiple, steeply above the five-year median but nicely beneath 2024 highs of 42.0X.
Image Source: Zacks Investment Research
Bottom Line
While several large-cap technology stocks involved with the AI trade have faced pressure over the last week, all three companies above – Nvidia (NVDA - Free Report) , Super Micro Computer (SMCI - Free Report) , and Broadcom (AVGO - Free Report) – continue to sport bullish earnings outlooks, with revisions remaining stable.
Nothing has fundamentally changed behind the story, with market participants likely taking profits after their strong runs. All remain bullish, with earnings estimate revisions confirming the positive business trends being witnessed.