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Time to Buy Shares in AI Leaders Vertiv and Nvidia?
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After carrying the stock market higher over the last two years, Vertiv ((VRT - Free Report) ) and Nvidia ((NVDA - Free Report) ), two of the best performing stocks in the market, have been hammered lower by the recent stock market correction. Trade policy uncertainty, cutbacks on fiscal spending and a potential slowdown in the economy have investors feeling uneasy, adding to the volatility.
Though it is impossible to know how long and how deep this correction will go, good investing principles don’t require us to predict what is going to happen in the immediate future. Instead of trying to forecast returns, investors would be better served by looking for stocks that are currently trading at discounts to their historical valuations.
Lucky for us, now that Nvidia and Vertiv have fallen 30% and 50% respectively from their recent highs, both are trading at reasonable valuations. Furthermore, both stocks enjoy long-term business and economic tailwinds, with strong growth forecasts in the foreseeable future.
Image Source: Zacks Investment Research
Nvidia Stock Near its Cheapest Valuation in a Decade
On Tuesday, the NVIDIA GPU Tech Conference (GTC), a week-long event reached its climax when Nvidia CEO Jensen Huang delivered his highly anticipated keynote address. Per usual, Huang did not disappoint, offering numerous exciting developments from the now world’s most innovative company including humanoid robots, quantum computing and more. My colleague Kevin Cook wrote up a fantastic review of the conference here.
Most notably, and I thought most importantly for investors was Jensen’s forecasts for future data center capex. He believes that one day, there will be 1 million data centers around the world, as well as what he calls AI factories, which will be visible from space. Huang believes that AI capex will push Nvidia’s annual revenue to $1 trillion by 2028. A bold prediction, but this is the guy that predicted the whole AI boom in the first place and positioned his company at the forefront.
I read recently that there will be more data produced in the next three years than all the past history combined, which put into perspective tech companies need to build out their infrastructure.
Along with the exciting narrative and Huang’s masterclass of hype-building, Nvidia boasts surprisingly reasonable business fundamentals. In addition to a Zacks Rank #2 (Buy) rating, reflecting rising earnings estimates, profits are projected to climb 25.7% annually over the next three to five years.
Furthermore, there have only been two occasions in the last decade when Nvidia traded at a lower relative valuation. Today, the company is trading at a one year forward earnings multiple of 27.9x, well below its 10-year median of 45.1x.
Image Source: Zacks Investment Research
Vertiv Shares Trade at a Discount Based on Growth Forecasts
Vertiv stock has been one of the hardest hit during this recent correction and though challenging for shareholders, provides a compelling opportunity for investors keen on acquiring shares. As a data center service provider, Vertiv has been one of the biggest winners of the AI-boom, with its stock more than 10xing over the last two years before the correction.
Investors need to be able to think for themselves and not let sentiment drive their decisions. The goal of a long-term stock investor is to buy great companies at fair valuations and let economic trends and company management do the compounding. With the potential of more than $1 trillion in future data center capex, Vertiv is set to be one of the primary beneficiaries of this ongoing technological revolution.
It is also trading at a very reasonable valuation relative to its growth forecasts and historical average. Today, it is at 23.2x forward earnings, which is right in line with its five-year median of 23.1x. Especially compelling are its earnings forecast, with profits forecast to grow 27.4% annually over the next three to five years, giving VRT a PEG ratio of 0.85, a discount based on the metric.
Finally, Vertiv also enjoys a Zacks Rank #2 (Buy) rating, reflecting continued bullish support from analysts.
Image Source: Zacks Investment Research
Should Investors Buy Shares in VRT and NVDA?
While short-term market volatility is unpredictable, long-term investors should focus on buying great companies at reasonable valuations. Nvidia and Vertiv have been among the biggest winners of the AI boom, and despite the recent selloff, their fundamental growth stories remain intact.
Both companies are trading at levels that provide a margin of safety for investors. Nvidia is near its cheapest valuation in a decade, and Vertiv, despite its rapid growth, is trading in line with its historical averages while boasting strong earnings forecasts.
Given their dominance in AI infrastructure and data center expansion, Nvidia and Vertiv remain two of the most compelling investment opportunities in the market today. While short-term swings may continue, history favors those who buy quality businesses at attractive prices and hold for the long run.
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Time to Buy Shares in AI Leaders Vertiv and Nvidia?
After carrying the stock market higher over the last two years, Vertiv ((VRT - Free Report) ) and Nvidia ((NVDA - Free Report) ), two of the best performing stocks in the market, have been hammered lower by the recent stock market correction. Trade policy uncertainty, cutbacks on fiscal spending and a potential slowdown in the economy have investors feeling uneasy, adding to the volatility.
Though it is impossible to know how long and how deep this correction will go, good investing principles don’t require us to predict what is going to happen in the immediate future. Instead of trying to forecast returns, investors would be better served by looking for stocks that are currently trading at discounts to their historical valuations.
Lucky for us, now that Nvidia and Vertiv have fallen 30% and 50% respectively from their recent highs, both are trading at reasonable valuations. Furthermore, both stocks enjoy long-term business and economic tailwinds, with strong growth forecasts in the foreseeable future.
Image Source: Zacks Investment Research
Nvidia Stock Near its Cheapest Valuation in a Decade
On Tuesday, the NVIDIA GPU Tech Conference (GTC), a week-long event reached its climax when Nvidia CEO Jensen Huang delivered his highly anticipated keynote address. Per usual, Huang did not disappoint, offering numerous exciting developments from the now world’s most innovative company including humanoid robots, quantum computing and more. My colleague Kevin Cook wrote up a fantastic review of the conference here.
Most notably, and I thought most importantly for investors was Jensen’s forecasts for future data center capex. He believes that one day, there will be 1 million data centers around the world, as well as what he calls AI factories, which will be visible from space. Huang believes that AI capex will push Nvidia’s annual revenue to $1 trillion by 2028. A bold prediction, but this is the guy that predicted the whole AI boom in the first place and positioned his company at the forefront.
I read recently that there will be more data produced in the next three years than all the past history combined, which put into perspective tech companies need to build out their infrastructure.
Along with the exciting narrative and Huang’s masterclass of hype-building, Nvidia boasts surprisingly reasonable business fundamentals. In addition to a Zacks Rank #2 (Buy) rating, reflecting rising earnings estimates, profits are projected to climb 25.7% annually over the next three to five years.
Furthermore, there have only been two occasions in the last decade when Nvidia traded at a lower relative valuation. Today, the company is trading at a one year forward earnings multiple of 27.9x, well below its 10-year median of 45.1x.
Image Source: Zacks Investment Research
Vertiv Shares Trade at a Discount Based on Growth Forecasts
Vertiv stock has been one of the hardest hit during this recent correction and though challenging for shareholders, provides a compelling opportunity for investors keen on acquiring shares. As a data center service provider, Vertiv has been one of the biggest winners of the AI-boom, with its stock more than 10xing over the last two years before the correction.
Investors need to be able to think for themselves and not let sentiment drive their decisions. The goal of a long-term stock investor is to buy great companies at fair valuations and let economic trends and company management do the compounding. With the potential of more than $1 trillion in future data center capex, Vertiv is set to be one of the primary beneficiaries of this ongoing technological revolution.
It is also trading at a very reasonable valuation relative to its growth forecasts and historical average. Today, it is at 23.2x forward earnings, which is right in line with its five-year median of 23.1x. Especially compelling are its earnings forecast, with profits forecast to grow 27.4% annually over the next three to five years, giving VRT a PEG ratio of 0.85, a discount based on the metric.
Finally, Vertiv also enjoys a Zacks Rank #2 (Buy) rating, reflecting continued bullish support from analysts.
Image Source: Zacks Investment Research
Should Investors Buy Shares in VRT and NVDA?
While short-term market volatility is unpredictable, long-term investors should focus on buying great companies at reasonable valuations. Nvidia and Vertiv have been among the biggest winners of the AI boom, and despite the recent selloff, their fundamental growth stories remain intact.
Both companies are trading at levels that provide a margin of safety for investors. Nvidia is near its cheapest valuation in a decade, and Vertiv, despite its rapid growth, is trading in line with its historical averages while boasting strong earnings forecasts.
Given their dominance in AI infrastructure and data center expansion, Nvidia and Vertiv remain two of the most compelling investment opportunities in the market today. While short-term swings may continue, history favors those who buy quality businesses at attractive prices and hold for the long run.