U.S. large-cap tech stocks have surged too much, has NVIDIA instead become a "value pit"?
With Broadcom joining the trillion-dollar market cap club, the large tech stocks have expanded to 8, abbreviated as "BATMMAAN". NVIDIA's expected price-to-earnings ratio for 2025 is 31 times, with an expected earnings growth rate of 52%, resulting in a PEG ratio of 0.6, making it the only one below 1 in BATMMAAN, indicating that the company has the lowest valuation
In the past year, U.S. tech stocks have once again become the focus of global investors.
With a market capitalization surpassing $1 trillion, Broadcom has officially joined the ranks of tech giants, expanding the club of large tech stocks to eight: Apple, Tesla, Microsoft, Meta, Alphabet, Amazon, NVIDIA, and Broadcom—these eight stocks are collectively referred to as "BATMMAAN."
Notably, among BATMMAAN, NVIDIA, which has the highest return rate, may currently have the lowest valuation.
Data shows that NVIDIA recorded a 171% increase in 2024, the largest among the eight stocks in BATMMAAN. Meanwhile, based on the closing price in 2024, NVIDIA's expected price-to-earnings (P/E) ratio is 31 times, while analysts generally expect NVIDIA's earnings to grow by 52% in 2025, resulting in a PEG ratio of 0.6.
The PEG metric was invented by investment master Jim Slater in the 1960s, referring to the company's expected P/E ratio divided by the expected earnings growth rate. If the PEG is greater than 1, the stock may be overvalued; conversely, it may be undervalued.
Among BATMMAAN, only NVIDIA has a PEG ratio below 1. This means that NVIDIA's valuation remains reasonable, making it the "cheapest" among large tech stocks. Broadcom ranks second lowest with a level of 2.3.
In comparison, although Tesla's expected earnings growth rate for next year is also 37%, its expected P/E ratio is as high as 121 times, pushing the PEG to 3.2, making it the highest in BATMMAAN.
Additionally, Microsoft recorded only a 12% cumulative increase in 2024, making it the only stock in BATMMAAN to underperform the market, with a PEG of 2.3, indicating overvaluation. The other two companies with low earnings growth rates are Alphabet and Meta, with PEG ratios of 1.8 and 1.9, respectively, while Apple and Amazon have PEGs of 1.8 and 1.4, respectively.
It is important to note that high valuations do not necessarily mean poor performance in the short term. Looking back at history, as we entered 1999 from 1998, despite many analysts warning that stock market valuations were too high, the S&P 500 index still rose by 21% in 1999