Are Analysts Getting Too Bullish on Microsoft and Nvidia?

Since then, many more have reached trillion-dollar valuations

And according to some analysts, it may not be long before there is a stock that's worth $5 trillion

They are trading at record levels and their valuations aren't exactly modest

And yet, analysts are jecting much more upside for these stocks

Are forecasts getting a bit too rosy for these giants, or can it still be a good time to invest in them

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Lately, however, Microsoft and Nvidia have been creating some space between Apple and are now firmly in the top two positions

Price targets can vary, but according to the consensus average, Microsoft has an upside of around 6% while Nvidia is at apximately 11%

But over time, and assuming more analysts upgrade their price targets, that consensus average will rise

Are these stocks already too expensive

These companies are highly valued, but they've also been growing at impressive rates over the years

Here's how the big three stack up against one another when looking at their respective price-to-earnings (P/E) multiples

Another way to put this into context is to compare these valuations against the growth rates these companies have been achieving in recent quarters

Growth rates data by YCharts If a company is growing at a fast rate, then it can be justifiable to pay a high premium, especially if expectations remain high

Nvidia is much more expensive than Microsoft with respect to earnings, and its growth rate is far higher as well, due to its dominance in the artificial intelligence chip market

The danger, however, is that a potential slowdown due in spending due to tariffs and trade wars could undermine the growth spects of these companies and make them worse buys in the cess

Is it too late to invest in Nvidia or Microsoft

Nvidia and Microsoft are highly fitable and strong es to invest in

I'm not convinced that will happen if the economy slows down, and that's why I think that expectations may be getting a bit too high for these stocks right now; there is too much optimism priced in, as they already look expensive today

But if you're planning to invest for at least five years, then either one of these stocks can still be a good investment to hold in your portfolio

They are among the safest investments to own

And while they may experience volatility in the short term, over the long term, they are still ly to rise significantly in value

David Jagielski has no position in any of the stocks mentioned

The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia

The Motley Fool has a disclosure policy.