Gavin Baker’s AI Stock Investing Approach: Micron and Nvidia Undervalued

Hedge fund manager Gavin Baker said valuation inefficiencies exist in the AI-related stock market. He judged memory chip stocks and some AI chip companies to be relatively undervalued. Specifically, he named Micron, SanDisk, and Nvidia as potential undervalued stocks.

Baker noted that optical-related stocks were relatively overvalued. He cited Lumentum and Coherent as examples of stocks trading at high valuation multiples. He explained that this multiple expansion creates overvaluation.

He saw the valuation gap as an investment opportunity. Baker suggested that if the AI cycle progresses evenly across the industry, stocks currently trading cheaply could deliver better performance over the long term. From this perspective, he recommended a strategy of emphasizing undervalued stocks.

Baker’s diagnosis focuses on “multiples”—the phenomenon of a stock price rising relative to earnings. He said that excessively expanded multiples are being observed in certain sectors. He noted the possibility that differences in multiples could translate into differences in future returns.

In the article, Baker again emphasized that current price disparities could be used as an investment strategy. He said that selecting companies trading at low prices and holding them for the long term is a reasonable approach. His argument assumes the possibility of sector rotation based on valuation.

The report summarized valuation differences across industries, including memory and optics, based on Baker’s remarks. His comments included specific company names and assessments related to multiples. The remarks were presented as an investment strategy proposal based on valuation comparisons.