Semiconductor giants Arm Holdings (ARM) and Nvidia (NVDA) are two of the hottest tech stocks of the past year. ARM Holdings’ share price has more than tripled, gaining an impressive 228% over the past 12 months. It’s hard to beat this kind of performance, but Nvidia achieved a 243% improvement over the same period.
Which of these two hot large-cap semiconductor stocks looks like a better investment opportunity? As we’ll discuss in this article, there’s a clear winner based on valuation and analyst sentiment.
Nvidia rating: high but justified
These are both popular AI-related semiconductor stocks, but there are significant differences between them when it comes to valuation. Nvidia is trading at a hefty 49.8 times January 2025 consensus earnings estimates. However, analyst consensus forecasts are for earnings per share (EPS) to increase to $4.03 for the year ending January 2026, up from expected earnings of $2.84 for the year ending January 2025 to $41.9 This is a significant increase in %. Based on these estimates, the stock is still up, but trades at a more reasonable 35.1 times forward earnings.
This is more expensive than the broader market (the S&P 500 (SPX) currently trades at 25x earnings), but at least it’s on the same page, which is probably a reasonable valuation for global markets. It can be argued that. The most cutting-edge companies, not to mention the ones whose revenue is expected to grow by more than 40% over the next year. For a giant company of Nvidia’s size and scope, the growth has been incredible.
Arm Review: Entering the Stratosphere
Nvidia’s high valuation is reasonable given its growth, but the same can’t be said for Arm Holdings, which trades at a much steeper valuation. ARM’s stock trades at a staggering 92.2 times its March 2025 consensus earnings estimate, nearly double NVIDIA’s valuation and nearly four times the average price of the benchmark S&P 500 index. corresponds to
Similar to Nvidia, ARM’s valuation multiple declines slightly as we look ahead to fiscal 2026, but the company’s stock still trades at 70.2x consensus earnings estimates, which is still the same as Nvidia’s 2026 price-to-earnings ratio ( This is more than double the PER). multiple. Simply put, it’s difficult for stocks to sustain such valuations over long periods of time unless they permanently record impressive growth rates. This is extremely rare.
Analysts expect ARM stock’s earnings to grow from $1.56 in the year ending March 2025 to $2.05 in 2026. While this 32% earnings growth forecast is impressive, it’s hard to argue that Arm stock should be trading at nearly twice its valuation. Nvidia’s expected earnings growth rate of 41.9% is higher than that of Nvidia.
Other important metrics
Nvidia isn’t just winning on price-to-earnings ratios. Nvidia’s price-to-sales ratio is high at 34.5 times, while Arm’s price is even higher at 45.9 times sales. It’s also worth comparing two chip stocks based on their PEG ratio (price/earnings ratio, growth rate). This is a useful metric for analyzing high-growth stocks like this, as it considers earnings growth when valuing a stock.
This simple ratio is determined by taking the price-to-earnings ratio and dividing it by the earnings growth rate. A lower PEG ratio is considered more attractive, and investors who like this metric ideally prefer a PEG ratio of 1.0 or less.
Nvidia’s PEG ratio of 1.9 is a little higher than you would normally expect, but it’s still reasonable. However, Arm’s astronomical PEG ratio of over 14x indicates that the stock is probably significantly overvalued, even considering impressive earnings growth.
Is ARM stock worth buying?
Turning to Wall Street, Arm has a Moderate Buy consensus rating, based on 14 Buy, 4 Hold, and 1 Sell ratings assigned over the past three months. ARM’s average price target of $141.77 implies downside risk of 6.7% from current levels.
Read more analyst reviews on ARM Stock
Is NVDA stock a buy?
Nvidia stock has a consensus rating of “Strong Buy” based on 39 buys, 3 holds, and 0 sells assigned over the past three months. NVDA’s average price target of $153.86 implies a potential upside of 9.1% from current levels.
Read more about analyst ratings on NVDA Stock
Clear winner: NVDA Stock
These semiconductor stocks have been two of the best performers on the market, but there’s no real competition here. Nvidia’s valuation is high, but it’s significantly cheaper than ARM stock, even though its revenue is expected to grow at a faster pace. Additionally, sell-side analysts see much more upside potential for Nvidia than Arm over the next 12 months, rating Nvidia a “strong buy,” while arm Holdings has a “moderate buy.” It’s just a “buy”. In this comparison of top chip stocks, NVIDIA is the clear winner.
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