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DBS rests its case against an AI bubble on Nvidia's 17x forward earnings multiple
DBS CIO Hou Wey Fook says AI stocks are not in a bubble, citing Nvidia at about 17x forward earnings and a 70% revenue rise forecast for fiscal 2028. The multiple stays cheap only while the profit forecasts beneath it hold.
The Investor · Invest desk
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What happened
- Nvidia reported $96.2 billion in revenue for its fiscal second quarter ended July 2026, up 106% from a year earlier.
- Data-center sales of the chips and systems used to train and run AI models made up nearly $89 billion of that quarter's revenue.
- Nvidia's management has described supply as constrained, with demand running ahead of what the company can produce.
- Hou recommends a barbell portfolio that pairs tech and AI growth stocks with defensive assets meant to hold steady in choppy markets.
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Why it matters
- exposure With about 92% of quarterly revenue coming from data centers, Nvidia's forecast profits, and with them its 17x multiple, move with the capital budgets of a small group of AI infrastructure buyers.
- constraint The 70% forecast depends on manufacturing capacity as much as on demand, because Nvidia cannot book revenue on systems it has not yet been able to produce.
- decision A client who acts on DBS's no-bubble call still keeps part of the portfolio in defensives, so the bank is stopping short of recommending concentrated exposure to chip stocks.
A forward multiple is a share price divided by a profit forecast. The roughly 17x Hou cited for Nvidia on October 5 [1][2] is only as firm as the forecast beneath it. The cryptobriefing report gives the same caveat: the figure assumes Nvidia delivers the expected profits, and the 70% revenue call is a DBS estimate [10]. Hold the share price still and cut next year's earnings by 30%, and the multiple becomes about 24x [5]. Halve them and it is 34x [6].
The dot-com comparison gives DBS the most room. According to the research behind the bank's view, peak dot-com valuations ran at about 100x earnings [7]. Nvidia at 17x is about a sixth of that. For today's price to carry a 100x multiple, forward earnings would have to come in about 83% below forecast [7]. Hou set the speculation of that era against the earnings visibility AI companies offer now [8].
The growth forecast already assumes a slowdown. The July quarter's 106% rise came off a year-earlier quarter of about $46.7 billion [2]. The 70% DBS projects for fiscal 2028 [3] is a lower rate on a far larger base. Fiscal 2028 begins in February 2027, so the July quarter belongs to fiscal 2027 [8]. The report does not give the fiscal 2027 total DBS is growing from. As a rough guide only, four times the July quarter is about $385 billion [3], and 70% on top of that is about $654 billion [4].
If estimates hold, the multiple stays near 17x and DBS is right on its own terms. If the supply limits management has described [6] push revenue past the 12-month window, the forward multiple climbs on an unchanged price even though demand is intact. If the large tech companies buying data-center systems [5] slow their orders, estimates and the share price fall together. In that case the 17x figure means little until the size of the cuts is known.
I think the case holds on the evidence given. Even halved profits leave Nvidia at about a third of the dot-com peak [6][7]. The counter-thesis is about scope. Every figure DBS cited is Nvidia's [2][3], but the verdict covers AI-related tech stocks as a group [1]. A 17x multiple shows investors paying a modest price for forecast profits. It does not show the forecasts are right. The thesis is wrong if Nvidia's forward estimates get cut while its share price holds, pushing the multiple toward the mid-20s [5].
What to watch
- Nvidia's fiscal third-quarter report: whether data-center revenue and management's supply commentary support a pace that leads into 70% growth in fiscal 2028.
- Capital spending plans from the largest tech companies buying AI infrastructure, the customers behind nearly all of Nvidia's revenue.
- Whether DBS revises its 70% fiscal 2028 forecast or shifts the weighting of its barbell toward defensives.