DBS CIO: NVIDIA Corporation (NVDA.US) has a forward P/E of only 17 times, AI tech stocks are far from bubble territory.

DBS Group Chief Investment Officer Hou Wey Fook said that NVIDIA Corporation's (NVDA.US) price-to-earnings ratio, combined with its expected 70% earnings growth next year, indicates that artificial intelligence (AI)-driven tech stocks are far from entering bubble territory. Data shows that NVIDIA Corporation's current stock price is about 17 times its expected earnings over the next 12 months. Hou compared this valuation with Cisco Systems, Inc.'s (CSCO.US) 100x valuation before the dot-com bubble burst. "If the benchmark company in the AI trade is valued at only a low-teens multiple, how can it be called a bubble?" he said in an interview, adding that the semiconductor and AI rally still has "tailwinds." However, Hou still advocates a "barbell" strategy to "control the overall volatility of the portfolio": combining growth tech stocks with investment-grade fixed-income products to achieve stable returns, while using hedge funds and gold as intermediate risk diversification tools. In terms of market performance, NVIDIA Corporation's stock price hit a record intraday high last Friday, coming just one step away from becoming the first listed company in the world to surpass a $6 trillion market capitalization. According to media reports, NVIDIA Corporation and SoftBank have each completed the final $10 billion investment in OpenAI's previous funding round, fulfilling their respective $30 billion investment commitments. In addition, U.S. September nonfarm payroll data came in below expectations, leading the market to lower its bets on a Federal Reserve rate hike in October, which drove tech stocks broadly higher and further boosted NVIDIA Corporation's stock price. NVIDIA Corporation has risen about 25% year to date and currently has a market capitalization of about $5.6 trillion.