NVIDIA-Led Relief Rally in Tech Sector? Undervalued ETFs in Focus

Global technology shares rallied on Nov. 20, 2025 as investors rotated back into AI-linked stocks following AI behemoth NVIDIA’s upbeat results. The tech space has been seesawing for quite some time now as investors went skeptical about the rising overvaluation concerns in the AI sector.  

NVIDIA’s upbeat earnings hit the market at a time when investors are anxious about overvaluation concerns in the AI sector. Matt Britzman, senior equity analyst at Hargreaves Lansdown believes that while AI valuations in certain areas are stretched, NVIDIA’s fundamentals remain strong, as quoted by BBC.

NVIDIA’s Upbeat Quarter Lifts Sentiment

For the quarter ending in October, NVIDIA posted $57 billion in revenue, marking a 62% uptick from a year earlier. The surge was driven by huge demand for its chips used in AI data centres, with that division’s sales surging 66% to more than $51 billion.“Blackwell sales are off the charts, and cloud GPUs are sold out,” CEO Jensen Huang said in a statement, as quoted on Yahoo Finance.

For Q3, Nvidia saw earnings per share (EPS) of $1.30 on revenue of $57.01 billion. Earnings beat the Zacks Consensus Estimate of $1.24 per share while revenues beat the estimate by 4.14%.  The company recorded EPS and revenues of $0.81 and $35.1 billion, respectively, in the year-ago quarter.The company’s data center business brought in $51.2 billion versus the Bloomberg consensus estimate of $49.3 billion, as quoted on Yahoo Finance.

Its upbeat fourth-quarter guidance reassured investors about continued AI demand. NVIDIA expects revenues to be $65.0 billion, plus or minus 2% for the fourth quarter of fiscal 2026. The guidance beat the Zacks Consensus Estimate of $60.30 billion. Shares jumped about 5% in premarket trading.

Global Chipmakers Advance

The positive momentum spread to Europe, where Dutch semiconductor makers BESI and ASMI rose more than 3% and 2%, respectively, as quoted on CNBC.

In Asia, Samsung Electronics climbed 3.5%, while Hon Hai Precision Industry (Foxconn) gained 3.3%, reflecting broad optimism across global chip and AI supply chains, as mentioned in the above-said CNBC article.

U.S. tech stocks rebounded too in the pre-market trading. AMD shares were up about 5%.Arm went nearly 4% higher. Marvell Technology added 3.7%. Broadcom climbed 3%.

Concerns Over AI Ecosystem Concentration

Karen McCormick, chief investment officer at VC firm Beringea, voiced caution about the increasingly interconnected nature of major AI players, especially after NVIDIA and Microsoft signaled plans to invest up to $15 billion in OpenAI peer Anthropic.

Such close connections between AI companies, she warned, could make the whole market more vulnerable if an AI bubble bursts, as quoted on CNBC. But she also noted that these firms have very strong balance sheets and wealthy financiers, which means they are less likely to collapse.

Matt Britzman, senior equity analyst at Hargreaves Lansdown believes that while AI valuations in certain areas are stretched, NVIDIA’s fundamentals remain strong, as quoted by BBC.

Undervalued Tech ETFs in Focus

Against this mixed scenario where prominence and risks both are associated, tapping undervalued tech-based exchange-traded funds (ETFs) would be an intriguing option. These ETFS have lesser valuation than the broader tech ETF iShares U.S. Technology ETF IYW (which has a P/E of 42.36X). P/E data are as per etfdb.com.

Invesco Next Gen Connectivity ETF KNCT – P/E: 20.98X

Invesco S&P 500 Equal Weight Technology ETF RSPT – P/E: 22.74X

State Street SPDR S&P Software & Services ETF XSW – P/E: 22.99X

State Street SPDR S&P Kensho Future Security ETF FITE – P/E: 23.16X

Invesco AI and Next Gen Software ETF IGPT – P/E: 23.45X

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This article originally published on Zacks Investment Research (zacks.com).

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