Nvidia trades cheaper than semiconductor sector, says Tony Zhang

Nvidia, the company that essentially became the pickaxe seller during the AI gold rush, is now trading at a discount to the broader semiconductor sector. That’s according to Tony Zhang, Chief Strategist at OptionsPlay, who laid out his case on CNBC.

Nvidia’s stock has pulled back toward the $200 level, which technical analysts have flagged as a key support zone.

The valuation case

Zhang pointed to Nvidia’s forward price-to-earnings multiples, which currently sit in the range of 22-25 times earnings. In English: for every dollar of future profit Nvidia is expected to generate, investors are paying roughly $22-$25 for the stock. That’s considered favorable when stacked against both industry peers and Nvidia’s own historical averages.

Zhang has historically favored defined-risk options strategies for trading Nvidia. His approach leans toward structures like call spreads and credit spreads, particularly around earnings announcements when implied volatility tends to spike. The logic is straightforward: capture upside exposure while capping potential losses.

The broader semiconductor sector provides useful context here. Global chip sales are projected to approach $1 trillion in 2026, with AI accelerators, the category Nvidia dominates, identified as a primary growth driver.

What investors should watch

For equity investors, the key question is whether Nvidia’s forward multiples of 22-25x represent a genuine discount or a market recalibration. If global semiconductor sales do hit the projected $1 trillion threshold in 2026, Nvidia’s share of that pie, particularly in AI accelerators, could justify significantly higher valuations.

The competitive landscape also matters. While AMD and custom silicon efforts from hyperscalers like Google and Amazon continue to chip away at Nvidia’s market share, the company’s software ecosystem, particularly CUDA, creates meaningful switching costs that competitors haven’t fully overcome.

Zhang’s credit spread approach implicitly acknowledges downside risk by limiting downside exposure while maintaining upside participation.

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