The AI trade has lost some of its heat recently, with key players like Nvidia NVDA and Advanced Micro Devices AMD experiencing downward price movements. The pivotal question arises: Is this sell-off justified or overblown?
The Solid Foundation of Nvidia
Nvidia stands strong as it prepares to report its Q2 results, slated for later in August. Recent quarters have seen a surge in earnings and sales, driven by relentless demand. Projections for the current fiscal year remain unchanged, with a substantial 73% increase in the Zacks Consensus EPS estimate from the past year, signifying a projected 105% year-over-year growth.
Revenue revisions continue to impress, and the upcoming release is set to showcase significant growth potential. Specifically, Data Center expectations exceed last year’s figures by a vast margin.
The stock may be under pressure, but underlying fundamentals are robust. It retains a central position in the AI trade, making it a prime choice for investors seeking exposure. Furthermore, its valuation metrics are historically reasonable, indicating that investors are not paying a premium for expected growth.
The Record-Breaking Journey of AMD
Advanced Micro Devices recently surpassed the Zacks Consensus EPS and sales estimates in its latest quarterly report. The company’s AI outlook remains optimistic, highlighted by a significant boost in Data Center sales, setting a quarterly record and demonstrating remarkable growth.
Despite the positive performance, there have been downward revisions in AMD’s fiscal year projections. The current Zacks Consensus EPS estimate indicates a 26% year-over-year growth rate, showcasing a downward trend in expectations over the past year.
Similar to NVDA, AMD’s valuation multiples are not overstretched, with a PEG ratio reflecting a fair price relative to its growth prospects.
The Bottom Line
While both Nvidia NVDA and Advanced Micro Devices AMD have faced recent challenges, their strong quarterly results and ongoing demand paint a promising long-term outlook. With reasonable valuation metrics, the focus should be on the solid fundamentals rather than short-term fluctuations. In essence, while the recent market movements may be unsettling, they do not alter the compelling narratives of these companies.
