British stock investors still can’t get enough of Nvidia (NASDAQ:NVDA) shares. According to eToro, the tech giant rose to the third most-held stock among its UK clients during the second quarter. This was up from fifth in the first three months of the year.
eToro analyst Sam North notes that “AI excitement is continuing to drive returns, and UK retail investors are ensuring their portfolio provides adequate exposure to this theme“.
So far, Nvidia’s justifying the hype around its shares. Revenues beat forecasts again in the first quarter to reach a new peak of $26bn. This reflected a 427% surge in Data Center revenues, a division focused on producing microchips for the AI revolution.
Rising demand for AI shares
It isn’t the only stock whose popularity’s soaring thanks to AI. Stocks with high exposure to this new tech frontier comprised 10 of the 20 greatest ‘top risers’ among eToro’s global customer base.
Biggest risers among eToro customers
Ranking
Company
Quarter-on-quarter increase
1
Dell Technologies
38%
2
Broadcom
38%
3
Lululemon Athletica
28%
4
National Grid
24%
5
Super Micro Computer
22%
6
Nvidia
22%
7
Micron Technology
21%
8
Novo Nordisk
21%
9
Eli Lilly
16%
10
TSMC
13%
Nvidia’s making incredible progress to harness the growth potential of AI. But I can’t help but fear that this is more than baked into the company’s pumped-up share price.
The business now trades on a forward price-to-earnings (P/E) ratio of 46.6 times. This is higher than, say, Microsoft and Meta‘s corresponding readings of 33.6 times and 26.4 times respectively. Meanwhile, Google owner Alphabet deals on a P/E multiple of 23.4 times.
The danger for investors is that this sort of premium could cause Nvidia’s share price to topple if sales figures begin to cool. It could also be a casualty of a wider market sell-off if fears over the global economy and interest rates grow.
There could be better ways for me to ride the AI theme right now. The Sage Group‘s (LSE:SGE) one company I’d much rather invest in today.
FTSE 100 tech star
This FTSE 100 company supplies accounting, payroll and HR software to businesses. And it’s enjoying impressive growth, thanks to its transition to a cloud-based model with better recurring revenues. Underlying sales and operating profit increased 10% and 18% respectively between October and March.
Sage is investing heavily in AI to automate mundane finance tasks, among others, freeing up the company’s time and energy. It launched its Sage Copilot digital assistant in the UK earlier this year, a tool that uses generative AI to complete jobs.
The business has invested heavily in AI since it established a dedicated division several years back, resulting in a pipeline of products it hopes will take revenues to the next level.
Sage’s shares aren’t immune to a potential price correction if fears over the tech sector grow. However, its forward P/E ratio is far below than of Nvidia shares, at 28.7 times.
The UK software giant also looks much more attractive based on predicted revenues. Its forward price-to-sales (P/S) ratio is just 4.4 times compared with 24.7 times for the US tech giant.
I think Sage could be a top dip buy following recent price weakness.
The post Nvidia shares are soaring! Could this AI stock be a better buy? appeared first on The Motley Fool UK.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Lululemon Athletica, Meta Platforms, Microsoft, Novo Nordisk, Nvidia, and Sage Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
