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Nvidia (NVDA) trades at less than 25 times forward earnings with 62% expected EPS growth next year.
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Broadcom (AVGO) carries $65B in debt and trades at 34 times forward earnings with slower growth.
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Nvidia has traded flat around $180 since August while underlying earnings continue climbing.
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There has been a loss of momentum for Nvidia (NASDAQ:NVDA) in recent months, which has been the case for many other stocks leading the AI rally. Investors are using that as an excuse to move into other names in the stock market, but is that really a smart idea today?
NVDA stock trades at $180 as of this writing. Shares have been lingering in the $180 range since August. One would expect a lot more action from the supposedly best AI bet.
The anemic price action can mostly be traced back to the anxiety investors have about the “AI bubble” potentially bursting this year. Nvidia is an easy target for the bears after all. However, bulls expect the price action to speed up in the coming months through next year. Financials are still healthy, and Wall Street can’t keep underpaying if earnings keep climbing. Could this take NVDA stock above $300 this year, or should you buy Broadcom (NASDAQ:AVGO) instead?
AVGO stock has been hotter than Nvidia due to its smaller size and competitiveness in the AI scene. Let’s find out if it can keep that up this year or if you’re better off sticking to NVDA stock.
The stock may be trading sideways, but it is actually getting cheaper… fast! The company’s underlying earnings have been climbing quarter after quarter, meaning a flat share price has turned Nvidia into one of the cheapest AI chip stocks you can buy today if you go by the forward price-to-earnings ratio. NVDA stock trades at less than 25 times earnings, despite analysts expecting 62% EPS growth for the next fiscal year.
Revenue growth is also expected to be 50.6%. Growth hasn’t fallen off as quickly as the bears would have expected, and AI demand has remained strong with no sign of a slowdown. Management has kept its beat-and-raise cadence. As a result, nothing yet points to any weakness that can drag the stock down substantially from here.
Instead, I expect the growth to continue and accelerate in the coming months. NVDA stock should ideally trade at around 35 to 40 times forward earnings. Even that might be too cheap, considering stocks like AMD (NASDAQ:AMD) go for 35 times forward earnings with half the sales growth.
The biggest predictor of NVDA’s price is its earnings. If we look at EPS, FY 2026 (ending January 2026) is expected to end with Nvidia having $4.7 in EPS. Guidance suggests revenue of around $213.3 billion.
2027 EPS is expected at $7.6, with revenue of $321.2 billion.
If NVDA stock trades at 35 times earnings for FY 2027, the stock price can hit $266. I expect it to go even higher if management keeps beating estimates and raises its guidance. The highest EPS estimate puts $9.7 as a possibility for FY 2027, meaning NVDA stock could trade over $300 at just 31 times earnings. It is likely that the premium paid would be even higher if it managed to outperform consensus by such a wide margin.
Anyhow, $300 is clearly in the books for Nvidia this year. The stock needs to climb 60% from here to be at $300, which should happen as long as the share price follows EPS growth.
I would go further and put $266 as the floor price for 2026. The PE ratio is unlikely to drop below 35 times earnings.
I’d argue that AVGO stock gives you a worse deal compared to Nvidia. You’re paying more per dollar of the company’s earnings, even though it has worse growth metrics and a worse long-term outlook.
The company does come with an “underdog” story due to custom AI chips plausibly stealing customers from Nvidia, but it’s not going to make a dent in its market share.
You’re paying 34 times forward earnings and 17 times forward sales for the stock. Growth is expected to be over 50% for both sales and EPS, but fall to 38% in FY 2027. Keep in mind that the total debt load is over $65 billion, so the enterprise value is also slightly worse.
With that in mind, I’d stick to NVDA stock.
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