MW Nvidia's stock is cheaper than Exxon's. Are investors ditching tech for energy?

By Christine Ji

Investors concerned about Big Tech's massive AI capital expenditures may be drawn to lush capital returns within the energy sector

The energy sector pays out over half of its earnings in the form of dividends.

Investors might be suffering from a case of artificial-intelligence fatigue, causing them to look beyond hot technology stocks for returns. In an unexpected twist, Nvidia's stock trades more cheaply than Exxon Mobil's on various metrics.

Shares of Exxon (XOM) have rallied 36% since the beginning of the year, while Nvidia's stock (NVDA) has fallen 3%. This momentum has boosted Exxon's valuation, with the stock trading at 18.3x earnings expectations for calendar 2027, while Nvidia's stock trades at 16.1x expected earnings for the same period, according to FactSet. The gap widens when considering a longer time horizon: Nvidia's 2028 price-to-earnings ratio is 13.9x and Exxon's is 16.4x.

Nicholas Colas, co-founder of DataTrek Research, flagged this development in a note Wednesday, adding that energy stocks in general have gotten pricier. The largest energy names currently trade at around 20x forward earnings, just below the S&P 500 index's SPX 20.7x, Colas said.

Read: Software stocks are in bargain territory - and that's reviving an age-old debate

Just a year ago, the idea of commodity-sensitive energy companies reaching these valuations would have been unthinkable. And rising oil prices don't tell the whole story of the recent boom in energy stocks. Colas wrote that "structurally higher energy valuations are at least partly due to investors consciously choosing a sector with historically strong capital discipline."

Energy companies haven't historically been valued on an earnings basis, as the industry is famously capital-intensive and known for high levels of debt. Analysts usually opted for cash-flow or asset-based metrics. Exxon's stock actually traded at a higher P/E multiple than Nvidia's from April to July 2020, but simply focusing on that would have been misleading, because Exxon was not profitable for several quarters of the pandemic due to a collapse in global energy demand. That resulted a small denominator within the P/E ratio that artificially inflated the profitability metric.

Today, Big Tech companies that have powered much of the AI boom are spending increasing amounts on AI. Some companies have begun to issue debt as well.

"Over the last 12 months, U.S. Big Tech has gone from the most impressive free-cash-flow machine in market history to one that will, in the aggregate, consume almost every single dollar of operating earnings to build out its artificial intelligence capabilities," Colas wrote.

Concerns over AI spending have made it difficult for Nvidia's stock to rally in a meaningful way. Shares have been roughly flat over a six-month span, as investors look past upbeat earnings and worry about the sustainability of AI budgets.

Read more: Nvidia's stock chart just displayed a bearish signal. Is the AI star losing its shine?

On the other hand, the energy sector "become a very careful steward of shareholder capital" according to Colas, making it attractive to investors looking for an alternative to tech companies and their heavy spending.

He pointed out that the sector returns over half of its earnings in the form of dividends, compared with just 11% for tech.

"Given high oil prices, the energy sector's dividends are virtually assured," Colas said. "Investors were already wary about Big Tech's AI [capital expenditure] spending before this month's oil shock, but current events have given them a productive outlet for expressing that frustration."

-Christine Ji

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March 25, 2026 12:12 ET (16:12 GMT)

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