DBS Says Nvidia Valuation Suggests No AI Bubble Yet
DBS Group’s chief investment officer, Hou Wey Fook, argues that Nvidia’s current valuation does not suggest an AI bubble, despite broader market concerns. In a Bloomberg TV interview on October 5, Hou pointed out that Nvidia’s forward price-to-earnings ratio stands at 17 times its projected earnings over the next 12 months, with earnings expected to grow 70% next year. He contrasted this with Cisco Systems’ 100-times valuation before the dot-com crash, emphasizing that Nvidia’s multiple and growth outlook do not resemble past excesses.
Hou described Nvidia as the 'poster child of AI trading,' noting that its valuation does not justify bubble fears. He highlighted ongoing tailwinds for semiconductor and AI-related investments, reinforcing the company’s strong position. However, a separate analysis noted that Nvidia’s market value had dropped by about $1 trillion from its peak due to competition from other major technology companies developing their own AI chips.
To manage volatility, Hou recommends a 'barbell' strategy, balancing growth-oriented technology stocks with investment-grade bonds, and using hedge funds and gold as diversifiers. While acknowledging risks, he believes Nvidia’s current valuation and projected earnings make a compelling case for the AI trade not being a bubble.