Nvidia and Broadcom Trade at 15x Earnings Despite Eight-Month Stagnation
Shares of Nvidia and Broadcom have been unchanged over the past eight months and are down on the year despite tight compute chip supply. Both trade around 15 times earnings, while supply constraints have shifted to semicap, memory and optical, potentially setting up earnings and multiple re-rate catalysts.
1. Eight-Month Stagnation
Shares of Nvidia and Broadcom have been largely flat for the past eight months, with both names down year-to-date despite ongoing demand for compute chips.
2. Shift in Supply Constraints
While compute chip supply remains tight, the main bottlenecks have moved to semicap equipment, memory modules and optical components, boosting related chip stocks on expectation of higher capital spending.
3. Valuation Compression
Both Nvidia and Broadcom now trade around 15 times earnings, reflecting compressed multiples after falling from earlier highs and limiting further downside risk in valuations.
4. Potential Catalysts for Re-rating
Analysts anticipate upcoming earnings beats and growing proof of return on AI investments could drive earnings upside and trigger multiple expansion, providing a clear catalyst for stock re-rating.