Nvidia and Meta Platforms, key components of the ‘Magnificent Seven’ stocks, are currently trading at lower forward price-to-earnings (P/E) ratios than the S&P 500. According to a study by The Motley Fool as of early March 2026, Nvidia’s forward P/E is 22.1 and Meta’s is 21.8, while the S&P 500’s forward P/E stands at 23.6. This means that investors are paying less for the projected earnings of these tech leaders compared to the average company in the S&P 500.
The price-to-earnings (P/E) ratio assesses a company’s share price in relation to its earnings per share (EPS). Although not a foolproof tool, it helps analysts and investors evaluate the relative value of shares within a peer group or an index.
When earnings grow significantly, surpassing stock price appreciation, the stock price appears to be ‘cheap’. NVIDIA’s revenue grew 65% and earnings per share increased 60% in fiscal 2026, leading to a naturally lower P/E ratio that makes the stock appear ‘cheaper’ compared to the market price.
Despite high demand for AI hardware and AI-sector deals, alongside strong financial performance, the fall in the stock prices has established a valuation floor not seen in years. Nasdaq 100 is flat YTD with all the big tech stocks in the red. Microsoft is down 15% while Tesla has dropped 7% YTD. All other stocks from Nvidia, Meta, Google, Apple, and Amazon are down between 2% and 7% so far in 2026. Only Nvidia and Meta are trading at the lowest price/earnings multiple among the ‘Magnificent Seven’ stocks.
The forward P/E ratio rewards companies by dividing the stock price by analyst consensus earnings estimates for the next year. For example, Nvidia has a 37.2 P/E compared to 29.6 for the S&P 500, but just a 22.1 forward P/E compared to 23.6 for the S&P 500. Similarly, Meta Platforms is also slightly cheaper than the S&P 500 based on forward earnings.
According to the report, Meta is the best investment choice for those interested in companies effectively leveraging their AI investments, distinguishing itself from Amazon, Microsoft, and Alphabet, which focus on enhancing data center infrastructure for cloud and AI service demands.
Meta has demonstrated effective monetization of AI by enhancing its apps (Instagram, Facebook, Messenger, WhatsApp) for users, creators, and advertisers, rather than just constructing AI infrastructure.
As far as Nvidia is concerned, the company derives over half of its data center revenue from a few cloud providers, accounting for nearly 90% of total sales. The risk is only a handful of customer base. The study identifies that a reduction in spending from these key customers could lead to a decline in growth rate. Nevertheless, if Nvidia manages to achieve earnings growth of 20% to 30% annually, it may still be considered a valuable investment at current prices.
Overall, Nvidia and Meta can be considered by those who believe their potential rewards surpass the associated risks. Currently, Nvidia and Meta trade around $183 and $650, respectively. The cheaper both stocks become, the more risk is being taken off the table for long-term investors, says The Motley Fool study.
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