NVIDIA shares are lower today as atrocious Chinese PMI data, coupled with the continuing overhang from the debt limit saga, hammer US equities. However, there is no end in sight to NVIDIA’s AI-fueled bull run, and the stock can eclipse its dot-com bubble peak valuation before everything is said and done.
NVIDIA expects to earn around $11 billion in revenue in the ongoing quarter, corresponding to a 55 percent upside relative to the street consensus just a few weeks back. According to JP Morgan, the chipmaker would remain the primary beneficiary of AI-related spending this year, scooping up as much as 60 percent of the proverbial pie.
Meanwhile, in order to cash in on the hype around AI, NVIDIA continues to launch new products. At the Computex 2023, the GPU maker announced the GH200 Grace Hopper Superchip. The chip combines the Grace CPU and Hopper GPU architecture for “giant-scale AI and HPC” applications by delivering computing power of 1 exaflop.
While its current valuation of 200x earnings (0.5% earnings yield) may seem expensive at first blush, $NVDA is trading at a significant discount to its 2000 peak valuation of 1,000x earnings (0.1% earnings yield)
So there's that pic.twitter.com/S535ctScI3
— Julian Klymochko (@JulianKlymochko) May 31, 2023
This brings us to the crux of the matter. As explained in the above tweet, NVIDIA is currently trading at a Price-to-Earnings (P/E) ratio of 200x on a Trailing Twelve Months (TTM) basis. More specifically, the stock is trading at a P/E multiple of 207x, based on a TTM EPS of $1.92 and the current stock price of $397.48. However, during the peak mania phase of the dot-com bubble, NVIDIA was trading at a TTM P/E multiple of 1000x!
If NVIDIA is able to match its valuation zenith of the dot-com era, it will correspond to a stock price of $1,092, constituting a further upside potential of a whopping 174 percent!
Of course, it remains to be seen whether the high-flying stock is able to soar to such lofty levels, given the still-hefty prospects of an economic recession in H2 2023.
Great chart here from @t1alpha corroborating what The Cat is saying below about $NVDA.
Despite the meteoric price rise, there are signs of distribution beneath the surface, with more shares getting sold against the bid than the ask. https://t.co/dMWfUhuM0c pic.twitter.com/DZNxI9vySp
— Simon Ree (@simon_ree) May 31, 2023
There are, however, signs of widespread distribution taking place in the stock beneath the surface.
So is $NVDA in a bubble similar to https://t.co/ozN4bah6Cw ? Not yet, but now is the moment of truth. It’s levitating at 3 sigma over 200SMA , which is 100% > 200SMA , but it did hit 350% > 200SMA during the infamous https://t.co/ozN4bah6Cw bubble. Excluding that period, 60d fwd… pic.twitter.com/lTbDOQpBcP
— KKGB Kitty (@INArteCarloDoss) May 31, 2023
As explained in the tweet above, apart from the dot-com bubble, NVIDIA shares have always posted negative returns once the stock price climbs 90 percent above the 200-day SMA. Currently, the stock price is hovering 100 percent above this critical threshold.
Do you think further gains are in store for NVIDIA, or is the stock about to fall off the proverbial precipice? Let us know your thoughts in the comments section below.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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