Are Nvidia, Eli Lilly, AMD's High Equity Valuations In Peril From Higher Rates?
Portfolio Pulse from Neil Dennis
DataTrek's analysis suggests that mega-cap stocks like Nvidia (NVDA), Eli Lilly (LLY), and AMD (AMD) may withstand the current higher rate environment despite their high P/E ratios. Historical context shows that while the Fed's aggressive rate cycle in 2022 and 2023 has raised concerns, it has not impacted equity valuations as significantly as the volatility seen in the 1970s. The firm notes that the current debate over the Fed funds rate is less severe compared to past decades, and even if rates were to increase significantly, it might not affect equity valuations as much as expected.
February 27, 2024 | 8:35 pm
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AMD's P/E ratio of 334 is exceptionally high, yet DataTrek's analysis suggests it could manage well in a higher rate environment.
Advanced Micro Devices' extremely high P/E ratio would typically indicate a high risk in a rising interest rate scenario. Nonetheless, DataTrek's comparison with historical data and current analysis provides a perspective that AMD might not be as adversely affected by the current rate hikes.
CONFIDENCE 75
IMPORTANCE 70
RELEVANCE 80
NEUTRAL IMPACT
Eli Lilly's extremely high P/E ratio of 131 might raise concerns, but DataTrek believes it can withstand higher interest rates.
Eli Lilly's P/E ratio is among the highest, which usually would make it more susceptible to negative impacts from rising rates. However, according to DataTrek's analysis, the company's valuation may not be as affected by the current higher rate environment as one might expect.
CONFIDENCE 75
IMPORTANCE 70
RELEVANCE 80
NEUTRAL IMPACT
Nvidia's high P/E ratio of 65.8 suggests vulnerability to rate hikes, but DataTrek's analysis indicates resilience in the current environment.
Nvidia's high P/E ratio typically indicates sensitivity to interest rate changes. However, DataTrek's historical context and analysis suggest that the current rate environment may not significantly impact Nvidia's equity valuation.
CONFIDENCE 75
IMPORTANCE 70
RELEVANCE 80