SoftBank CEO Masayoshi Son Says Nvidia Is Undervalued. Here's Why I Disagree.

Group 1 - SoftBank CEO Masayoshi Son believes Nvidia stock is undervalued despite its significant price increase of 880% over the past two years [1][3] - Nvidia has transitioned from primarily focusing on the gaming industry to leveraging its technology for artificial intelligence (AI) applications, leading to substantial growth in its compute and networking services [4][5] - The company's revenue for the latest quarter reached $30.04 billion, with a net income of $16.60 billion, indicating strong financial performance [7] Group 2 - Nvidia's stock is currently trading below its five-year average on both price-to-earnings (P/E) and price-to-free cash flow (P/FCF) metrics, suggesting potential undervaluation [8] - The total addressable market (TAM) for generative AI is expected to expand, which could sustain demand for Nvidia's GPUs in the coming years [10] - However, competition from major tech companies developing their own custom chip architectures poses a significant challenge to Nvidia's market position [11][12] Group 3 - The introduction of new GPUs by competitors may lead to price reductions for Nvidia, potentially normalizing revenue and tightening profit margins [12][13] - While Nvidia's valuation multiples may appear reasonable, the rising competition could indicate that the stock is trading at a premium compared to other AI investment opportunities [14] - The current market dynamics suggest that Nvidia may be more suitable for trading rather than a long-term investment, emphasizing the importance of timing in buying and selling [15]