NVIDIA and AMD stocks have fallen, but don’t get too hung up on their all-time highs.
NVIDIA (NASDAQ:NVDA) and Advanced Micro Devices (NYSE:AMD), two rising semiconductor companies until late 2021, have had most of their gains reversed as chip shortages gave way to chip gluts. Both equities have fallen by almost 60% from their all-time highs.
At their present levels, it’s debatable whether these two equities are excellent long-term investments. They are not, however, clear-cut deals.
Market Analysis of NVIDIA and AMD Stocks
NVIDIA and AMD were both performing well before the outbreak. NVIDIA dominated the gaming GPU market while also developing a profitable data center GPU business geared at artificial intelligence and other computationally heavy applications, while AMD was snatching market share in the PC and server CPU industries.
The epidemic boosted both stocks. Graphics card costs skyrocketed as bitcoin miners snatched them up, and PC sales peaked in 2012. NVIDIA and AMD stocks increased 339% and 173%, respectively, from the beginning of 2020 to the beginning of 2021.
Were the protests justified?
Only if you thought pandemic-era demand was the new normal. Since then, the bitcoin bubble has burst, wiping off a large portion of the need for graphics cards and causing the industry to overstock. Furthermore, PC sales are declining. This year, unit shipments are estimated to be down roughly 10%, with the consumer side of the sector suffering the most.
NVIDIA and AMD stocks have fallen 59% and 63%, respectively, from their high in late 2021. Are these good times to buy? Another perspective is that the stocks are still up roughly 109% and 44%, respectively, since the beginning of 2020. Those huge drops show that both companies are screaming values if you anchor to the all-time highs. However, both equities are still much above their pre-pandemic levels.
Consider the Stock Price-to-Sales Ratio.
NVIDIA and AMD both trade at far lower price-to-sales ratios than at their peaks, but it doesn’t imply the stocks are cheap. Both companies’ price-to-sales ratios are currently about where they were three years ago. And the firm’s growth prospects, at least for the next year or two, are not very promising.
NVIDIA and AMD may be good long-term investments, but they are not cheap. If you decide to invest in these companies, be sure you understand what you’re getting yourself into.
Featured Image – Unsplash © Nana Dua