Are AI Stocks Overpriced? These 3 Leaders Look Cheap (NVDA, TSM, VRT)

Core Viewpoint - The AI trade is gaining consensus on Wall Street, with major companies like Nvidia, Taiwan Semiconductor, and Vertiv trading at reasonable valuations despite the hype surrounding AI innovation [1][2]. Company Summaries Taiwan Semiconductor (TSM) - TSM plays a critical role in the global semiconductor supply chain, particularly in AI chip production, reporting nearly a 40% year-over-year increase in monthly revenue due to high demand for AI chips [3][4]. - Full-year sales are expected to grow by 28.2% in 2025 and 14.8% in 2026, with long-term earnings projected to grow at a 20.8% annual rate over the next three to five years [4]. - The stock trades at 23.1x forward earnings, aligning with its five-year median, making it an attractive investment given its strategic importance and growth potential [5]. Nvidia (NVDA) - Nvidia is the leader in AI hardware design, with its GPUs being essential for AI training and inference systems, and is expanding into robotics and quantum computing [7]. - Earnings are projected to grow at 28.2% annually over the next three to five years, with sales expected to increase by 51.4% this year and 25.1% next year [8]. - The stock trades at 36x forward earnings, significantly below its five-year median of 55x, presenting a buying opportunity for a high-growth company at a discounted valuation [9]. Vertiv (VRT) - Vertiv provides critical power and thermal management solutions for data centers, which are essential for the AI infrastructure [10][11]. - Sales are projected to grow in the high teens for the next two years, with earnings expected to rise at 27.2% annually over the next three to five years [14]. - The stock trades at 30.6x forward earnings, a premium to its five-year median of 23.3x, justified by its strong growth profile and a PEG ratio just above 1 [14]. Investment Considerations - Nvidia, Taiwan Semiconductor, and Vertiv are essential to the AI supply chain and offer reasonable valuations compared to other speculative AI investments, making them compelling options for investors [15][16].