All Hail the Chip King!
Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!
This week, we’re talking about:
All Hail the Chip King!
Nvidia is the biggest company in the world.
NVDA stock is the most expensive it has ever been.
And the stock price is… undervalued?
This is…
All Hail the Chip King!
I’ve poked fun at NVDA over the years for having a high valuation, crazy growth projections, and a CEO who’s a bit Musky in terms of trying desperately to be cool.
Sick tat.
Leather jacket? Don’t let this guy around your girl.
Jensen is also basically the only tech leader saying we don’t need to regulate AI.
Gee, I wonder why?
In unrelated news, I asked a guy who owns a tobacco farm if he thinks cigarettes are healthy and he told me, “Yeah, they’re all good.”
But I digress.
I’m not here to take shots at discount Danny Zuko. I’m here to eat some humble pie.
What has Fonzie’s nerdy cousin done with this company over the past few years after me saying the growth expectations were unreasonable?
Just kept growing.
Doubled their revenue again over the past year and is now bringing in nearly $100 billion per quarter.
Their margins have pushed up over 60%.
So more than half of every dollar that comes in is straight profit.
Leaving them with quite a bit of cash to invest.
But the stock market isn’t about "what have you done for me lately?" It is about "what are you doing in the future?”
We are talking about the biggest company in the world at this point. Friday, the company’s stock reached another all-time high.
Sure, Nvidia has been growing at an astronomical clip, but can it keep going?
Well, I’m not sure if you’ve heard about this AI thing, but it is here to stay. NVDA makes the chips that are essentially Lay’s classic in the yellow bag. A.k.a. the best.
Since global data center growth is projected to double over the next five years, projections are still looking good for the company.
And even as their crazy earnings per share growth is slowing down from the wild, more-than-double-every-year pace it has been on, the average estimate is still at 34% per year over the next five years.
But let’s say they do even worse. Let’s say they drastically underperform to the tune of a meager 20% per year over the next five years.
Our way-low estimate of 20% EPS growth and a reasonable multiple of 25 times earnings has the stock price still doubling from today’s price by 2031.
So I give in.
I wave my white flag.
I take back all the Jensen jokes.
NVDA is the Chip King and I am a mere servant to their realm.
I hereby bend the knee to the Blackwell throne.
All Hail the Chip King!
Final Thought
The market surged on terrible employment data Friday. If you read your market flashcards, you’ll know why.
