NEW YORK : Nvidia Corp’s soaring rally has thrilled investors this year - except for the sizeable number of fund managers who avoided what they believe to be an expensive stock.
Nvidia's valuation has been a primary reason keeping some investors away, while others are wary of buying in after the stock’s mammoth 230 per cent run this year. The stock currently trades at 33.6 times forward 12 months earnings estimates, compared with less than 24 times for the Nasdaq 100, according to Refinitiv Datastream.
Aside from valuation, concerns about whether demand for chips will continue at current levels and about how the AI landscape will evolve have also kept some on the sidelines. Yet fund managers have been under-allocated to many of those stocks, including Apple, the largest U.S. company by market value.
Still, of 15 large tech and growth stocks tracked by Morgan Stanley, Nvidia was the third most under-owned in actively managed portfolios as of the end of the second quarter, with only Apple and Microsoft being more under-owned. Even so, its valuation makes some investors wary. Although Nvidia’s valuation has moderated since, the stock had a forward price-to-sales ratio of 25 times in late July, according to Jeremy Schwartz, global chief investment officer at WisdomTree.