[pasiaj]

Discounted Cashflows calculation for Nvidia would require 10x growth and a 55% profit margin for 10 years to justify the current valuation.

If the company achieves a 4-5X growth (15% per year) and 30% margins (instead of 55%) that would place the share price at $176 - 1/4th of what it is today.

[ArtTimeInvestor]

Those abstract numbers don't help us evaluate the value of a company.

Let's look at the addressable market:

The sum of wages in the USA alone is about $100T per year. How much is it worldwide? Let's say $400T.

That is the current TAM when we expect computers to replace humans like cars replaced horses.

Capturing only 1% of that TAM would mean $4T in yearly revenues.

Nvidia's $2T market cap seems tame in face of the size of the opportunity.

But there is another point: A new technology not just replaces an old technology. It 10xes the usage. There are way more cars on the road now than there were horses back then.

The size of the market will grow beyond those $400T. We will build way more stuff when robots carry out all the work. Most of planet earth is unused at the moment. That will change.

[kergonath]

This does sound suspiciously like the “everything Internet” of the dotcom bubble.

[ArtTimeInvestor]

And here we are now. On the internet.

[acdha]

Yes, but very few of the companies that was used to promote are still here or relevant. You can be right about the global trend but wrong about individual companies.

For example, in 1999 I bought food & other goods by delivery to my office and worked with companies selling online, using my handheld computer with a fast wireless connection. Clearly those were ultimately successful ideas, but that didn’t mean that investors in Kozmo, Pets.com, Ricochet, or Handspring got rich.

[kergonath]

The thing being useful in the long term does not mean that any valuation is right, or that any business model involving the thing makes sense. These are different things.

[asadotzler]

The internet is not the web and the dot com bubble was not the internet, it was the web. Are you too young to remember any of this or just getting it wrong. The interent was always going to find uses and already had before the web and the dot com bubble so saying "the internet's great" isn't relevant.

[klausa]

I'm sorry; are you trying to suggest that the total addressable market of Nvidia is _literally the entire world's wages_?

[ArtTimeInvestor]

The world's wages are the TAM for replacing humans with computers.

Nvidia is a key player in this. So I would be surprised if they capture less than 1% of that value.

[asadotzler]

I would be surprised if they capture 1/10th of 1%, heck, 1/100th of 1% of the worlds annual wages. You're losing folks here with some pretty wild predictions based on absolute guesswork with no supporting reasoning other than you'd be surprised.

[ivalm]

That’s literally the AI bull case. Replacement of all human labor.

[kortilla]

No it’s not. The bull case is replacement of labor that interacts directly with computers, and that one is already super bullshit based on the current results.

[mvdtnz]

This kind of ridiculousness is exactly the style of nonsense we hear during bubbles. You're really making the claim that the addressable market for these word guessing machines includes every person who hires plumbers, drain layers, house painters, hookers, massage therapists, chimney sweeps and MotoGP riders. This rhetoric is out of control.

[asadotzler]

They're very silly people and I too was trolled by their silliness into responding.

[themoonisachees]

Also consider: fundamentals matter for individual investing, but on the whole the market does not care at all about fundamentals. Many things are overpriced or underpriced because the planets aligned, and pretending that the stock market is an accurate representation of the value of each company is missing the forest of thinly-veiled gambling as a business for the trees.

[bjconlan]

You're not accommodating that the value of people /mechanical turks can be adjusted to perhaps a value lower than this in some regions... This obviously will put downward pressure on all regions... Except perhaps the people who serve said services (not specifically Nvidia). If anything this plays into OpenAI's/Sam's goal of creating an AI-hardware fab (and with the current market valuations he'll probably get what he needs to do it)

Mind you my personal perspective orients towards the opinion that tech companies do lead the markets more than others through metrics I can't personally rationalise but it's something we all seem to agree with (and I'm ok with if my superannuation/401k is always growing)

[p1esk]

If robots carry out all the work there will be no 400T in salaries

[ivalm]

There will be equivalent value. Just means need UBI/etc

[p1esk]

How is this going to work exactly?

[pixl97]

That's the fun part, nobody knows.

But at the end of the day values of money are made up bullshit that attempt to assign a number to scarcity. If we make a world where computers can cheaply (energy/material wise) make all the items humanity needs, that future world is one that is a lot better off then the one we currently exist in. At least if we consider human needs being met valuable.

If science fiction tropes have any connection to reality, us humans may sit around all day in hedonistic gay space communism playing games while robotic/AI systems produce and trade needed resources and energy between each other producing 'value' while humanity itself is just a value sink.

[p1esk]

In this scenario some people will still be rich and powerful while the rest will be poor and powerless. Only now the elites don’t really need the poor, right? So what’s going to happen when the next Hitler decides to shrink the world population using robot armies?

[kortilla]

Companies don’t pay nvidia for that though because nvidia doesn’t offer a product to replace 1% of the workforce.

[mint2]

“Most of planet earth is unused at the moment. That will change.”

correct, it needs used for what its true purpose is: paper clip feedstock.

But seriously, what does that comment event mean. The earth isn’t being used? More use would invariably be mean more dystopian, despoiled and privatized, why is that good?

[asadotzler]

You're just making up that TAM capture percentage and I think it's bullshit.

[fspeech]

Nvidia p/e is less than 40 based on their most recent quarter run rate. If they get 15% growth from here their current valuation is more than justified. The problem is their revenue is their customers' cost. And generative AI companies, whose voracious demand for compute drives the surge in Nvidia sales, aren't making anywhere remotely close to $80B a year, the current run rate of Nvidia data center sales.

[DonsDiscountGas]

NVIDIAs margins are likely to stay high, that's the nature of selling highly specialized technology. 10x growth does seem like stretch though.