[adam_arthur]

30x sales is not undervalued.

“At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?” — Scott McNealy, Business Week, 2002

The simple truth is that the people bidding it up indiscriminately have no clue about the fundamentals. You only win if you get out before reality sets in.

This is not some microcap company that can eventually justify such an extreme multiple via actual growth

[danielmarkbruce]

The simple truth is that relying on LTM sales is something only people who don't understand the business fundamentals do.

Nvidia is in a very good position in a rapidly growing market. For folks who don't understand that, it might be comforting to look at recent history for sales numbers, gross margins etc. Those numbers are practically meaningless for Nvidia 2032 financials.

In 2004 "value" guys were looking at Google's IPO and calling bs. 20 years later, sales are up 100x. Market cap is up 60 or 70x. Those value guys were looking at LTM.

King of value guys, Warren Buffett:

"Future profitability of the industry will be determined by current competitive characteristics, not past ones. Many managers have been slow to recognize this. It’s not only generals that prefer to fight the last war. Most business and investment analysis also comes from the rear-view mirror."

[adam_arthur]

Yes, the future is obviously what’s important.

So you make an educated guess on what the future earnings will be and work backwards from that to determine whether something is a good investment.

So what is your revenue/earnings projection for NVDA and terminal multiple to justify today’s valuation. You do have one right?

[danielmarkbruce]

Finger in the air - 10 years, $200 bill rev at 25% net income margin and 30x earnings multiple seems totally reasonable.

Not a great return from current prices, but this situation is nowhere near detached from fundamentals. The only people making that claim aren't grasping the situation we are in with respect to demand for GPUs from AI and the competitive position Nvidia have managed to get themselves into. The world has changed in the last few months as far as computing is concerned.

[adam_arthur]

So given those numbers, you are projecting to earn a 50% return in total over 10 years, or 4.1% per year.

Current market cap $1T, projected market cap in 10y $1.5T given 50B net income * 30.

That’s quite terrible given the commensurate risks. You aren’t pricing in at all that CPUs can be used for inference, FAANGs will compete, AMD cards will surely become viable too if the market is growing that quickly. Apple’s chips today can be used for fast LLM inference for large models, and they weren’t even designed with that intention in mind. Competitors didn’t care before because it was a small market.

So how is it logical at all to invest at these prices? Even if you double the revenue projection to $400B, the total return is not very compelling over 10 years, and carries a large amount of downside risk versus alternatives.

I have no doubt that people will make money playing hot potato with it over the next few months, but the stock price is likely to go nowhere over a longer timeframe. Eventually the greater fools run out

[JumpinJack_Cash]

> > but the stock price is likely to go nowhere over a longer

The only way to make money on nVidia is shorting, mega-caps hit a ceiling and the value of shares simply stops going up.

It's the classic S-curve phenomenon where the ceiling is 1T-ish

[adam_arthur]

Yes, antitrust/legal risks increase as well, and so on. Unfortunately you have a mania here that could last for many months, or even a bit longer (see: dotcom bubble)

There is effectively no rational fundamental argument for nvidia to go materially higher such that compensates for the risks. Rationality is not what’s at play though

[danielmarkbruce]

I can use a pen and paper for inference too. I can even do training with pen and paper.

The claim for AMD has been there for years. They can't write software. Cuda and Nvidia chips are the only real game in town and have been for longer than most expected and there is really nothing that looks like it will take over. Custom ASICs were going to take over, until they didn't.

Anyone making these claims isn't close enough to the market. The real fundamentals are in the details, not in hand wavy nonsense.

[adam_arthur]

None of that matters, the numbers matter.

Investing has nothing to do with whether technology is legitimate, real or cool, and everything to do with the amount of money you can make from that technology. And the numbers show NVDA will be a poor to middling investment in the long run even if the strongest bull case to the fundamentals materializes. Even if you 2x, 3x, 4x the numbers you provided. If you have to use extremely optimistically bullish numbers to get to a 10% CAGR (matching the index), there's a big problem.

Please show me the math otherwise.