NVIDIA, is everything over?

Bernstein believes it is still too early to worry about the ‘AI trading is over’.

Author: Jiang Zihan, Zhao Ying

Source: Wall Street News

NVIDIA has been in a difficult situation since the beginning of this year. After experiencing concerns about growth, supply chain, and regulatory risks, its stock price has fallen by nearly 15%, far exceeding the 1% decline in both the semiconductor and S&P 500 indices. But is this all over for NVIDIA?

Not necessarily! Bernstein believes that although everything seems to have ended, perhaps it can start again…

On March 4th, Bernstein analysts Stacy A. Rasgon, Alrick Shaw and others released a report stating that although Nvidia has underperformed and has a low valuation so far this year, Nvidia’s Blackwell product cycle is accelerating, and the current valuation is becoming more and more attractive.

Nvidia’s current valuation has fallen to a new low. After a sharp drop in the US stock market on Monday, Nvidia’s forward P/E ratio is about 25 times, hitting the lowest level in the past year, close to the lowest point in 10 years.

In fact, NVIDIA’s current trading price relative to the Philadelphia Semiconductor Index is lower than parity (we have only seen this once or twice in the past decade), and only has a slight premium relative to the S&P 500 index, which is the lowest level since 2016.

Bernstein said that although Blackwell’s launch did not go as smoothly as the company had hoped, the problem has now been resolved:

After confirming with NVIDIA, the Blackwell revenue for the fourth quarter reached $11 billion, and all orders have been shipped in January, indicating that supply chain bottlenecks have been broken.

Meanwhile, Nvidia also stated that demand will continue to outstrip supply in the coming quarters, with customers’ capital expenditure figures continuing to rise. More importantly, DeepSeek does not pose a threat to AI demand, but may actually accelerate growth.

For NVIDIA, one potential risk Bernstein is concerned about is the increasing regulatory pressure - AI proliferation rules. This refers to the possibility of the US government introducing new regulations to restrict the international spread of AI-related technologies and hardware. Bernstein warns that for every $10 billion reduction in revenue, NVIDIA’s earnings per share (EPS) may decrease by approximately $0.25.

Overall, Bernstain believes it is still too early to worry about the ‘AI trading is over’.

Nvidia’s current valuation is becoming more and more attractive, as market sentiment is currently turning cautious, but corporate spending willingness is still rising, the product cycle has just started, and the GTC conference will also be held in a few weeks. In addition, historically, when Nvidia’s P/E ratio falls to 25 times or less, investors usually can achieve substantial returns (the average next year return rate in the past reaches 150%, with relatively limited downside risks).