[scottiebarnes]

NVDA's current forward P/E ratio (price to earnings) is about 37.

That means if we hold constant the profit earnings, if you bought the whole company at its current valuation ($4tr), it would take you 37 years to break even.

Is this reasonable? Depends on sector and growth potential. To me, this is a "fair" valuation and not overly inflated based solely on existing earnings.

[yibg]

37x only makes sense if the growing continues, otherwise better to put the money is a high yield savings account. The big question mark of course is how long that growth can continue for. At the current rate their revenue and earnings are both growing I don't see how that's sustainable long term. But maybe sustainable enough to a point where the current investment can get to a break even in say 15 years.

[arcanemachiner]

Compared to Palantir's P/E ratio of ~750, that seems very reasonable.

[nativeit]

I can understand that, at least in theory. I feel like this is one of the only contexts where markets accommodate long-term thinking, which frustrates my own sensibilities. Thanks for the add’l perspective.

[rdsubhas]

Or 23 years if the currency depreciates 2% each year.

Or 16 years at 5% inflation.

[ElevenLathe]

Seems pretty unlikely to me that they can sustain their current earnings until 2062, but I'm no Wall St analyst.

[scottiebarnes]

Yes, that is a limit of the model (PE ratio) that we're using. It requires the holding of all variables to be constant, which is not practical.

We use it as a snapshot in time to check our sanity and to allow us to compare apples to oranges.

That said, you could have made the same statement about AAPL or MSFT 20-30 years ago, and you would have been dead wrong.

[ElevenLathe]

Fair point, but without an engraved prophecy from a licensed and bonded deity, I probably wouldn't have bought AAPL or MSFT in 1988 either, certainly not with the intent of holding it until 2025. I would have been wrong in some sense, but one has to take on the risks one is comfortable with. I'd rather hold a broad index and focus on other things!

[scottiebarnes]

Fair enough.

As someone who bought NVDA in 2016/2017 and held till now, I'm very happy with the way I applied my software knowledge to profit where I won't have to work again.

Risk taking is best done in domains where you have an edge!

[ElevenLathe]

I'm curious: Did you hedge your 2017 NVDA bet so that it was literally just on the performance of that one stock?

[scottiebarnes]

I bought shares, a sum that I could afford to lose but also a non-trivial amount.

As it went up, I occasionally sold some and took profit, but not much, till now.

I saw how important and productive machine learning was, and it seemed like NVDA had an excellent CUDA moat, so that was my thesis for that bet. In the last couple years I sold some and bought a house.

This is obviously a story with survivorship bias. But anyway my superpower isn't technical knowledge, its the lack of emotion and bias towards non-action when markets tumble. As you probably know, time in the market is better than timing the market.

[yibg]

Doesn't need to be sustainable until 2062 though. It'll take until 2062 to break even if they keep with projected numbers for next year. They can be flat forever after that and it'll still be 37 years to break even. If they maintain the same growth for even 5 years, the break even time shrinks down dramatically.