Bernstein analysts argue that worries over the end of the AI trade are “a little premature,” maintaining a positive outlook on Nvidia (NASDAQ:NVDA) despite a 15% retreat year-to-date. After years of extraordinary returns, Nvidia’s stock has slowed, underperforming both the broader semiconductor market—which has pulled back around 85%—and the S&P 500, down just 1%.
Valuation and Product Cycle Momentum
Nvidia experienced a steep plunge of over 8% on Monday, with shares now trading at approximately 25x next twelve months (NTM) earnings—the weakest level in a year and near a 10-year low. Analysts led by Stacy A. Rasgon note:
“In fact, the stock now trades BELOW parity relative to the SOX (something we have seen only once or twice in the past decade) and at only a slight S&P premium, the lowest they have been since 2016.”
This pronounced de-rating is especially striking at the start of a new product cycle. Nvidia’s Blackwell product revenues reached $11 billion in January alone, signaling that supply constraints are easing and demand is poised to outstrip supply in the coming quarters. Moreover, capital expenditure from Nvidia’s customers continues to rise, underscoring the anticipated growth.
For detailed valuation metrics, investors can review key data via the Ratios (TTM) API.
Regulatory Landscape and International Exposure
While regulatory risks remain, including AI diffusion rules set to take effect in May and potential further bans in China, Bernstein points out that Nvidia’s sales in China—although at record levels—are the lowest as a percentage of revenue in the last decade. Any disruptions stemming from new licensing requirements for Nvidia hardware are expected to be short-term. Even if an H20 ban were imposed—a scenario Bernstein deems unlikely—the estimated impact on Nvidia’s earnings per share (EPS) would be limited to a mid-to-high single-digit figure.
Analysts explain, “For what it is worth, every ~$10B would account for ~25 cents in NVDA EPS; a full China datacenter ban would likely impact EPS ($5-6 baseline?) by mid to high single digits, with the stock already pulling back by much more than that.”
A Cautiously Optimistic Outlook
Despite the headwinds, Bernstein concludes that concerns over the AI trade ending are premature, with Nvidia’s valuation becoming increasingly attractive. The combination of easing supply constraints, robust product cycle momentum, and resilient customer capital expenditures suggests that the fundamentals remain strong.
For historical context on Nvidia’s performance, investors can leverage the Historical Earnings API, which offers insights into the company’s earnings trends over time.
In summary, while regulatory uncertainties and short-term valuation pressures persist, Bernstein analysts believe that Nvidia is well-positioned for a rebound. The market’s current discount may present an attractive entry point, making the overall outlook for Nvidia more optimistic than the prevailing sentiment suggests.
