Nvidia Is Now Cheaper Than the Average S&P 500 Stock: Wall Street Still Sees Record Profits

What happened

Nvidia is now worth more than $5 trillion and trades at about 18 times expected earnings, while the average S&P 500 stock trades at 19 times. Wall Street expects Nvidia to earn $12.03 per share over the next 12 months.

Confirmed

Global impact / market context

A lower multiple means investors pay less for each dollar of expected profit, which means the market is pricing in doubts even as earnings estimates rise. That gap can affect how investors position money between Nvidia and the broader market.

Analyst inference

Nvidia's multiple was above 40 times forward earnings in late 2022, when ChatGPT launched. Profits have since grown faster than the share price, pushing the multiple below the S&P 500 average for the first time since April 2015.

Analyst inference

What to watch

1. Wall Street expects Nvidia to earn $12.03 per share over the next 12 months, up from roughly 40 cents at the end of 2022. Confirmed
2. Watch whether analysts keep raising or start cutting those profit estimates, because forward earnings are the denominator that sets the multiple investors pay. Proposed
3. Watch whether the 11% discount to the S&P 500 narrows, which would signal investors regaining confidence in Nvidia's profit growth relative to other companies. Analyst inference

Evidence

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