2 Stocks So Cheap It's Like Christmas in July

The article argues Nvidia and Upbound Group look “surprisingly cheap,” citing Nvidia trading at 16x next year’s earnings versus high AI growth expectations, and Upbound yielding 7.4% while trading at ~5x this year’s adjusted earnings. For Upbound, the dividend payout ratio is ~37% (midpoint of guidance of $4.00–$4.35 adjusted EPS), with risks flagged around a softer economy, leverage (enterprise value > 2x modest market cap), and potential rent-to-own regulatory scrutiny. Overall, it frames both as valuation-driven setups despite growth/margin and credit/regulatory concerns.

Analysis

NVDA is not a classic valuation re-rating story; it is a cash-flow duration story. The market is implicitly saying the current scarcity premium is fading, but if hyperscaler capex stays elevated and software attach around CUDA/enterprise tooling remains sticky, earnings can outrun the multiple compression. The real risk is not competition in the abstract, but a digestion phase: even a modest pause in AI server orders can hit the whole semiconductor complex, with SOXX and names like AMD/AVGO/TSM exposed to the same sentiment swing.

UPBD is a different animal: the apparent cheapness is really leverage plus residual credit risk. The business can look defensive in a weak consumer tape, but if employment softens, its loss curves and funding costs can move against it at the same time, which is exactly how high-yield consumer lenders become value traps. Over 1-3 months, the key variable is not revenue growth but whether charge-offs and refinancing spreads stay benign; over 6-18 months, regulatory pressure and competition from BNPL/embedded finance could compress economics further.

Contrarian take: the market may be underestimating NVDA's ability to keep compounding earnings faster than the multiple can fall, while simultaneously overestimating UPBD's dividend safety as a durable signal. For NVDA, the thesis breaks if next-quarter guide implies material gross margin compression or if AI capex commentary rolls over; for UPBD, watch for widening ABS spreads, rising delinquencies, or a guidance reset. This is a relative-value market more than a broad bargain hunt: quality growth can stay expensive for longer than feared, while levered yield names can stay cheap for a reason.

Key Decisions for Investors

• Buy NVDA on 5-8% pullbacks over the next 2-6 weeks; target a 6-12 month hold. Risk/reward is favorable as long as AI capex revisions remain positive and gross margin stays structurally above the mid-30s.
• Express the AI view as a relative-value trade: long NVDA / short SOXX or AMD on any post-earnings weakness. Use the pair to isolate execution and moat, but keep sizing modest because the whole group can de-rate together if hyperscaler spending pauses.
• Do not chase UPBD solely for yield. Treat it as a hold or avoid until credit metrics confirm; the stock is a candidate short on any rally if delinquency trends or funding spreads worsen over the next 1-3 months.
• Set alerts on NVDA forward P/E > 22x or next-quarter guidance implying a material step-down in revenue growth; that would weaken the 'cheap compounder' thesis and justify trimming.