Key Points
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Most Wall Street analysts believe Nvidia and Meta Platforms are undervalued at current prices.
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Nvidia dominates the market for AI accelerators, but the company is truly formidable due to its full-stack strategy.
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Meta Platforms plans to launch a cloud computing business to help monetize its AI infrastructure.
- 10 stocks we like better than Nvidia ›
Readers probably know Jim Cramer as the boisterous host of CNBC’s Mad Money. What you may not know is that Cramer previously ran a hedge fund that earned an astonishing return of 24% annually over 14 years.
In the past month, Cramer has recommended buying shares of Nvidia (NASDAQ: NVDA) and Meta Platforms (NASDAQ: META). The stocks are up 1,300% and 460%, respectively, since January 2023. But most Wall Street analysts still think they are undervalued today.
- Among 66 analysts, Nvidia has a median target price of $300 per share. That implies 42% upside from its current share price of $211.
- Among 68 analysts, Meta Platforms has a median target price of $815 per share. That implies 22% upside from its current share price of $669.
Here’s what investors should know.
1. Nvidia
Nvidia is best known for inventing the graphics processing unit (GPU). Those chips were initially designed to render computer graphics, but they have since become the industry standard in accelerating complex data center workloads, especially artificial intelligence (AI). Nvidia has more than 80% market share in AI accelerators.
However, the company is truly formidable because it offers a full-stack computing platform that pairs GPUs with the adjacent hardware and software required for AI. CEO Jensen Huang says Nvidia systems often have the lowest total cost of ownership because the company builds entire data centers, which means it can optimize for performance and power efficiency across the whole computing stack.
Nvidia has merely matched the performance of the S&P 500 year to date despite immense demand for AI infrastructure. The most pressing issue for many investors is competition. Several of Nvidia’s customers have developed custom AI accelerators, sparking concerns that the company cannot maintain its dominance. But Brian Colello at Morningstar recently pushed back against that idea:
Nvidia has a wide economic moat, thanks to its leadership in graphics processing units, hardware, software, and networking tools needed to enable the exponentially growing market around artificial intelligence. In the long run, we expect tech titans to strive to find second sources or in-house solutions to diversify away from Nvidia, but these efforts will, at best, only chip away at Nvidia’s dominance.
Last week, Jim Cramer expressed a similar view, saying investors are so focused on competition from hyperscalers like Amazon and Alphabet that they are overlooking an important fact: Demand for Nvidia GPUs is so immense that the company cannot keep up. “It’s one of the cheapest stocks in the entire S&P 500 when gauged against its growth rate,” he added.
Wall Street estimates Nvidia’s adjusted earnings will increase by 56% annually through the fiscal year that ends in January 2028. That does indeed make the current valuation of 36 times earnings look downright cheap.
2. Meta Platforms
Meta Platforms stock has added 12% since Jim Cramer recommended buying shares on June 16. But he has continued to pound the table since then, particularly after Bloomberg revealed that Meta plans to launch a cloud computing business that will compete against Amazon, Microsoft, and Alphabet.
Most readers know Meta as a digital advertising giant. With 3.6 billion daily active users across its industry-leading social media properties, the company has a formidable data advantage that lets it target content and advertising. Meta has reinforced that edge with proprietary AI models that retrieve and rank ads, as well as AI creative tools that help brands build campaigns.
Of course, the company has spent a significant amount of money building AI infrastructure, designing custom chips, and creating proprietary models. Capital spending totaled $111 billion in 2024 and 2025, and Meta says it will hit $135 billion in 2026. But the company plans to launch a cloud computing business to help monetize those assets.
Bloomberg broke the story in June. “One potential plan includes selling access to various AI models that are hosted on Meta’s existing AI infrastructure,” according to the report. “The company is also considering selling access to ‘raw’ computing capacity, akin to other so-called neocloud businesses like CoreWeave.”
Jim Cramer likes that strategy. He believes that Meta’s “cloud business will be instantly profitable.” While the S&P 500 has advanced 11% this year, Meta stock has traded sideways, as investors are uncertain whether the company can earn sufficient returns on its AI spending. But plans to sell excess data center capacity should ease those worries to some degree.
Wall Street expects Meta’s earnings to increase at 15% annually through 2027. That makes the current valuation of 24 times earnings look very reasonable, especially given that Meta has beaten the consensus earnings estimate by an average of 6% over the last six quarters. I think Jim Cramer is right to be bullish.
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Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
