Key insights
- The analysis suggests AI hardware stocks' valuations hinge on sustained high growth from hyperscalers. While forward PEG ratios appear attractive, high PB, PS, and PE ratios indicate significant near-term growth is already priced in. The key risk is whether hyperscalers can maintain 50%+ annual demand growth for AI hardware beyond the next few years, which will determine if current valuations are justified.
Taking about stocks like Nvidia, Broadcom, AMD, Tsmc, Micron Tech. A few more smaller names.
When you see their forward PEG, below 0.5 and growing at 50%+ it looks like a steal deal.
But metrics like PB PS PE are very high and don’t tell a good story.
My analysis is at least 6-9 months growth is priced in. That explains the high PB PS PE ratios. But if they show sustained growth even in year 2027 and expected growth is 50%+ in year 2028, the price will adjust again and will increase almost as much as eps growth yoy.
Am I missing something? Everything depends on whether hyperscalers will be able to keep increasing demand by 50%+ each year for atleast 3 years. Right?