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by RosanaAnaDana 1102 days ago
You know I was wondering this the other day when NVDA's insane run up happened. I went down the road of trying to figure out if there was even enough silicon wafers, or if there even would be enough wafers in the next five years, to justify that price.

Unless all the planet does is make silicon wafers; no.
2 comments
xadhominemx 1102 days ago
Well you figured wrong - NVDA AI GPUs are a very small % of global foundry supply, if even if volume tripled, they will still be a small % of global foundry supply. NVDA’s revenue is high because their gross margins are extreme, not because their volume is high.
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austinwade 1102 days ago
Can you go into more detail? So you're saying that at a 200 P/E ratio NVDA there isn't even enough wafer supply for NVDA to grow into that valuation even over 5 years?
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RosanaAnaDana 1102 days ago
I mean, you've got the gist of it. I pulled some reports on silicon production, silicon waver prices and price trends, current fab capacity etc..

My back of the napkin basically suggested that silicon production would need to 4x and fab capacity 4x (neither of which are happening) and NVDA with would have to capture all of that to justify their current price. I didn't bother writing it up, just looked at it mostly because I was on the wrong side of that play. It's something worth considering for sure.

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austinwade 1101 days ago
Wouldn't NVDA just focus more on high margin datacenter products in order to grow into those higher earnings but with the the wafer limitation? Datacenter focused products are already starting to surpass gaming which is their second largest revenue source: http://www.nextplatform.com/wp-content/uploads/2022/05/nvidi...

It seems to me that yes while a 200 P/E may be high, they certainly could keep increasing the prices on the already high margin datacenter products, of which get quickly gobbled up by companies no matter what price they are because of the immense demand.

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refulgentis 1102 days ago
We're probably ~3 years out from all of those fabs gov'ts funded coming online, right?

(n.b. that's really good work on your end and I agree with your conclusion, just idly musing about the thing that bugs me, what the heck all these non-leading edge fabs are going to do)

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