Tesla used to be the S&P 500 stock you just had to own. But Nvidia is quickly pushing Tesla aside — and analysts say it's where the action will be.
How much higher can a stock already up 233% this year go? Plenty, say analysts. They expect Nvidia stock to be worth 31% more in just a year's time than it is now, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. If that's right, Nvidia would be valued at $1.5 trillion, holding it as the fifth-most valuable company in the S&P 500. Yes, ahead of Tesla way back at No. 8.
Expectations for Nvidia stock are miles ahead of the 8% gain analysts see for Tesla in the next year. Tesla, at that rate, would be worth just $785 billion — or only half of Nvidia's expected value.
"U.S. stocks are rallying after Nvidia's miraculous earnings reignited the AI trade," said Edward Moya of Oanda. "If AI is the future, then Nvidia is the 'fluxcapacitor' that will drive the biggest transformation in tech since the 'Back to the Future' trilogy wrapped up in the 1990s."
Nvidia Gives Tesla Run For Its Money
Nvidia also outshines Tesla in terms of expected fundamental growth.
Analysts now think Nvidia will make $10.82 a share in calendar 2023. That's growth of 224%. They think Tesla's adjusted earnings per share this year in contrast will fall 15% to $4.92 a share.
Next calendar year the two companies' growth could be much closer. Nvidia's adjusted calendar 2024 profit is seen rising 42.1%, practically in a dead heat with Tesla's expected 42.7% growth that year.
But analysts are scrambling to keep hiking their expectations for Nvidia fast enough. They've raised their EPS forecast for Nvidia's current fiscal year by nearly 40% in just a month. Forecasts for Tesla's ongoing fiscal year haven't budged in that time.
Being The New Tesla Is A Bad Thing?
But with sky-high expectations for Nvidia come stratospheric valuations.
"Nvidia is the stock market's new Tesla, where the market blindly assigns a ridiculously high and unrealistic valuation," said David Trainer of investment firm New Constructs. "We're not denying that Nvidia is a great company, but we are pointing out that its valuation is beyond lofty and unjustifiable."
On a simple valuation measure, Nvidia trades for 251 times its adjusted profit over the past 12 months, versus Tesla's 66 times. Both are premiums to the S&P 500, but the difference is stark. Still, savvy investors know P-E ratios are not a stock-timing tool.
Using a method of valuation that applies discounted cash flows, Trainer says Nvidia would need to boost revenue by an average of 20% a year for 25 years simply to justify its current stock price. That looks easy now: Nvidia's revenue is expected to rise 100% this fiscal year.
But few high-growth companies can maintain that kind of blistering growth for decades. And yet, Tesla's revenue is seen rising nearly 23% this fiscal year. And for that reason, analysts seem optimistic on Nvidia's prospects as do investors.
"Nvidia's ridiculous valuation achieved over such a very short period of time reminds us that 'fear of missing out' is alive and well and that is a very dangerous phenomenon for investors that never ends well," Trainer said.
Nvidia Outshines Tesla In S&P 500
| Company | Symbol | Market value now ($ billions) | Target value ($ billions) | % ch. to target |
|---|---|---|---|---|
| Apple | $2.8 | $3.1 | 13.4% | |
| Microsoft | 2.4 | 2.9 | 21.4 | |
| Alphabet | 1.6 | 1.9 | 15.5 | |
| Amazon.com | 1.4 | 1.7 | 27.7 | |
| Nvidia | 1.2 | 1.5 | 31.4 | |
| Meta Platforms | 0.7 | 0.9 | 24.5 | |
| Berkshire Hathaway | 0.8 | 0.8 | 6.8 | |
| Tesla | 0.7 | 0.8 | 6.0 |
