Nvidia shares now trade at their lowest valuation by one measure since 2011, at a discount to the S&P 500. Investors are weighing whether that signals a bargain or doubts about earnings forecasts, as the CEO scandal and a jump in Treasury yields add pressure.
Nvidia shares trade at 11.77 times expected earnings over the next 12 months, meaning investors pay less than $12 for every $1 of anticipated profit. That is the stock's lowest valuation by that measure since 2011, according to FactSet data. By comparison, the S&P 500 was most recently around 18 times expected earnings.
Bargain or doubts about earnings
The low multiple raises a question: is the stock a bargain, or are investors beginning to doubt the earnings forecasts that make it look cheap? Nvidia's shares were already falling before the scandal surrounding CEO Jensen Huang erupted, and his tenure at the helm has become another question mark for investors, MarketWatch reports.
Nvidia also tapped Joon H. Kim, a former federal prosecutor, to look into allegations involving Huang.
Yields jump after hot inflation data
Tuesday's trading offered another cause for caution. The 2-year Treasury yield posted its biggest one-day jump since April 2025 after a hotter-than-expected inflation report raised the prospect of bigger interest-rate hikes.
The AI boom might itself be helping fuel the inflation that is making borrowing for the sector pricier, according to the report. Federal Reserve Vice Chair for Supervision Michelle Bowman warned that AI-related debt is on track to exceed $800 billion this year, with companies in the boom increasingly entangled through loans, investments and financial guarantees.
Stocks were trading on a more upbeat note Wednesday, with Nasdaq-100 futures climbing sharply, which suggests beaten-down tech shares could be headed for a rebound.
Source: MarketWatch
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