DBS CIO: Nvidia (NVDA.US) expects a price-earnings ratio of only 17 times, and AI technology stocks are far from reaching the bubble zone

The Zhitong Finance App learned that DBS Group's chief investment officer Hou Wey Fook said that Nvidia (NVDA.US)'s price-earnings ratio and the expected profit growth rate of 70% next year indicate that artificial intelligence (AI) -driven technology stocks are far from entering the bubble zone.

According to the data, Nvidia's current stock price is about 17 times its expected profit for the next 12 months. Hou compared this valuation to the 100 times that of Cisco (CSCO.US) before the Internet bubble burst.

“If the benchmark company for AI trading is valued at only ten times, how can it be called a bubble?” In an interview, he said and added that the semiconductor and AI markets are still “smooth sailing.”

However, Hou still advocates adopting a “barbell” strategy to “control the overall volatility of the portfolio”: combining growth technology stocks with investment-grade fixed income products to achieve stable returns, while using hedge funds and gold as intermediate risk diversification tools.

Judging from market performance, Nvidia's stock price hit a record high in the intraday session last Friday, only one step away from becoming the first listed company in the world with a market capitalization exceeding 6 trillion US dollars. According to media reports, Nvidia and SoftBank have each completed the final $10 billion investment in OpenAI's last round of financing, and have each fulfilled their investment promise of 30 billion US dollars. Furthermore, the US non-agricultural data for September fell short of expectations, and the market lowered its bets on the Federal Reserve's interest rate hike in October, driving the overall strengthening of technology stocks and further boosting Nvidia's stock price.

Nvidia is up about 25% this year so far, and its current market value is about 5.6 trillion US dollars.