Cory Renauer, The Motley Fool

Sat, Jun 28, 2025, 12:34 AM5 min read

• Nvidia looks overvalued only if you don't consider how quickly earnings could grow over the next few years.

• Lam Research is a semiconductor equipment manufacturer that has a big hand in the production of high-bandwidth memory.

• ASML Holding is the only company producing the lithography equipment required to print the advanced semiconductors that artificial intelligence applications rely on.

• 10 stocks we like better than Nvidia ›

The stock market has recovered nearly all the losses that were sparked by fear of a new trade war. The benchmark S&P 500 index finished June 25 less than a percentage point below its all-time high.

Despite a big recovery for the overall stock market, several top tech stocks with a hand in the artificial intelligence (AI) revolution have been trading for attractive valuations. Demand for AI-related products hasn't translated into profits for the most popular large language model (LLM) providers, but sales of semiconductors and equipment required to produce those LLMs keep surging.

Lately, Nvidia (NASDAQ: NVDA), Lam Research (NASDAQ: LRCX), and ASML Holding (NASDAQ: ASML) have been trading at attractive valuations. If you have $1,000 -- or any amount -- available to invest in these stocks now, there's a good chance you'll realize market-beating gains over the long run.

If you follow the AI space, you probably heard that DeepSeek in China ignored CUDA, Nvidia's software development kit (SDK), to produce a competitive LLM using inferior graphics processing units (GPUs). The important thing for everyday investors to take from this event is that the vast majority of AI application developers aren't as capable and all but a handful of developers still rely on CUDA to build AI applications.

Nvidia's software advantage allowed its fiscal first-quarter sales to surge 69% year over year to a whopping $44.1 billion. With demand for AI computing on the rise, and a software advantage that keeps competitors at bay, several more years of rapid growth isn't a wild expectation.

On the surface, Nvidia stock looks expensive at 36 times earnings expectations. But once you consider how fast earnings are growing, the stock actually looks like a bargain right now.

The forward price/earnings-to-growth (PEG) ratio divides the trailing price-to-earnings ratio by the rate of earnings growth Wall Street expects in the year ahead. Anything below a 1.0 is considered undervalued, so Nvidia's recent forward PEG of 0.79 suggests now is a good time to buy.

AMD and Intel are furiously trying to overcome Nvidia's software advantage. But even if they succeed, they'll still likely employ advanced etch and deposition equipment from Lam Research, a leader in the space.