The AI sector has experienced remarkable innovation and growth, with a select group of companies capturing the spotlight. Notably, Microsoft (MSFT), Taiwan Semiconductor Manufacturing Co. (TSM), Broadcom (AVGO), Nvidia (NVDA), and Advanced Micro Devices (AMD) are emerging as leaders in the competitive race for AI supremacy, with Nvidia standing out as an undisputed champion.
Chart Source: Benzinga Pro, Data source: TradingView
Over the past year, Nvidia’s stock has ascended by 239.50%, and AMD’s stock has gained 121.49%. Following closely, Broadcom’s stock has risen by 109.12%, trailed by Microsoft’s 56.58% increase and TSM’s 40.61% surge.
The exponential proliferation of artificial intelligence has propelled these technology stocks to new heights. However, as stock prices soar, the price-to-earnings ratio amplifies unless matched by earnings growth.
Valuation Trumps Price for Investors
Despite the profitability and substantial revenue generation of the AI5 companies, investors seek assurance regarding the value of their investments before committing. In such scenarios, valuation gains significance as stock price outpaces intrinsic valuation.
Also Read: Tech Giants Transform: From FAANG To Magnificent 7, Now Entering The AI5 Era
Given the circumstances, the question arises: which AI5 stock appears most undervalued at present?
To gain clarity on valuations, we assessed the two key multiples:
- Price-to-Earnings (P/E) Ratio: enabling investors to gauge the relative valuation of AI stocks based on their earnings generation.
- Enterprise Value-to-Sales (EV/Sales) Ratio: suitable for AI stocks with inconsistent profits but robust revenue growth.
| Stock | P/E FWD | EV/Sales |
| Microsoft | 34.57 | 13.33 |
| NVIDIA | 58.60 | 39.81 |
| AMD | 47.79 | 12.27 |
| TSM | 20.19 | 7.69 |
| Broadcom | 26.60 | 16.99 |
Data source: Seeking Alpha
TSM Stock – Analyst Predicts 26%+ Upside
The data in the table underscores the relative undervaluation of Taiwan Semiconductor stock, which has experienced the least growth among the AI5 stocks, suggesting room for further advancement. Analyst consensus rates the stock as a Buy. Susquehanna’s recent positive review (Feb. 13) assigns a price target of $160, implying a potential 26%+ upside from the current stock levels of $126.69 as of Feb. 18 close.
Read Next: Spotlight On The AI 5: Microsoft, TSMC, Broadcom, Nvidia And AMD
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