Microsoft and NVIDIA Remain Undervalued Amid AI Growth

The Magnificent Seven, a group of mega-cap companies including Microsoft and NVIDIA, have seen significant growth in recent years. However, despite this growth, both companies still offer attractive valuations for investors.

NVIDIA's latest results exceeded expectations, with revenue surging 106% year-over-year to $96.2 billion. The company's Data Center business was a highlight, with revenue up 117% year-over-year and 18% sequentially. NVIDIA's stock currently trades at a 16.4X forward 12-month earnings multiple, reflecting a high discount relative to its five-year median.

Microsoft also posted strong results, with sales up 18% YoY and earnings up 23% YoY. The company's Intelligent Cloud business, which includes Azure, saw revenue of $39.3 billion, beating estimates and growing at an accelerated rate of 32% YoY. Microsoft's stock currently trades at a 24.1X forward 12-month earnings multiple, reflecting a solid discount relative to its five-year median.