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Written by Trevor Jennewine for The Motley Fool
Nvidia and CrowdStrike have benefited from the artificial intelligence boom, with shares advancing 1,400% and 875%, respectively, since January 2023.
Nvidia dominates the artificial intelligence infrastructure market, and the stock looks very cheap compared to forward earnings estimates.
CrowdStrike enjoys a strong presence in several large cybersecurity markets, but the stock looks very expensive compared to forward earnings estimates.
Shares of Nvidia (NASDAQ:NVDA) and CrowdStrike Holdings (NASDAQ:CRWD) have added 1,400% and 875%, respectively, since the artificial intelligence boom began in January 2023. However, Jim Cramer recently recommended buying both stocks.
Why should you care what Cramer thinks? While best known for hosting CNBC's Mad Money, he previously ran a successful hedge fund that earned 24% annually over 14 years. That makes his opinion worth considering.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Nvidia dominates the artificial intelligence (AI) infrastructure market because its graphics processing units (GPUs) combine industry-leading performance with a software ecosystem of unparalleled breadth. Nvidia GPUs are used to accelerate training and inference tasks, and they account for nearly 90% of AI accelerator sales.
Beyond that, Nvidia also develops adjacent hardware that lets customers build integrated data center systems with a lower total cost of ownership than assembling systems from multiple vendors. Nvidia is the largest networking company in the world, and it's on pace to be the largest supplier of central processing units (CPUs) this year.
Nvidia reported exceptional financial results in the second quarter of fiscal 2027, which ended in July 2026. Revenue increased 106% to $96.2 billion, gross margin expanded 2.5 percentage points, and non-GAAP net income rose 120% to $2.22 per diluted share. The company is well-positioned to maintain that momentum as AI spending increases in the years ahead.
Wall Street estimates Nvidia's adjusted earnings will increase at 72% annually through the fiscal year ending in January 2028. That makes the current valuation of 36 times earnings look extraordinarily cheap. Those numbers give a price-to-earnings-to-growth (PEG) ratio of 0.5 -- anything below 1 is generally considered undervalued.
Indeed, among 72 Wall Street analysts, Nvidia has a median target price of $318 per share. That implies 42% upside from its current share price of $223. The stock's cheap valuation suggests the market is worried about the durability of AI spending, but I think those fears are misplaced. Investors should consider buying a small position today.
CrowdStrike provides a cybersecurity platform comprising 34 modules that address several large security markets. The company is best known for its dominance in endpoint security, which protects devices such as servers, workstations, and mobile devices. But it also has a strong presence in identity protection, cloud security, threat intelligence, and managed detection and response.
CrowdStrike differentiates itself by delivering dozens of cybersecurity products through one platform powered by a lightweight sensor that can be installed without system restarts. It streams telemetry data back to its AI engine, continuously improving its threat-detection capabilities. CrowdStrike claims "industry-leading efficacy and low false positives."
CrowdStrike reported encouraging financial results in the second quarter of fiscal 2027, which ended in July 2026. Revenue increased 26% to $1.4 billion, and non-GAAP earnings increased 35% to $0.31 per diluted share. CEO George Kurtz called it the "best quarter in CrowdStrike's history."
CrowdStrike is well-positioned to maintain its momentum as cyberattacks become more sophisticated with the help of AI. Wall Street expects the company's adjusted earnings to grow at 28% annually through the fiscal year ending in January 2028. Even so, the current valuation of 230 times earnings looks absurdly expensive.
Indeed, among 57 Wall Street analysts, CrowdStrike has a median target price of $245 per share. That implies 4% downside from its current share price of $255. CrowdStrike has a strong position in a growing industry, but the stock is too expensive after its 115% year-to-date gain. Investors should keep this name on their watchlists for now.
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Trevor Jennewine has positions in CrowdStrike and Nvidia. The Motley Fool has positions in and recommends CrowdStrike and Nvidia. The Motley Fool has a disclosure policy.