26-May-2024. Is Nvidia stock already expensive? The bad news is that, unfortunately, yes. At least to its own valuation history for the last 4+ years. At a price of $1064.69, this is already the 88th percentile of the valuation from 2020-2024 according to the price to sales ratio. In other words, only 12% of the time during this period was Nvidia more expensive. Below are some valuation points: - at the median valuation point, the price should be $815 (-23.5% from today's price) - at 75th percentile $952 (-10.9% from today's price) - at 90th percentile $1,095 (+2.9% from today's price) - at 95th percentile $1,157 (+8.7% from today's price) - at 100th percentile $1,348 (+26.6% from today's price) - at 25th percentile $719 (-32.5% from today's price) To calculate the price-to-sales ratio, I used the annualized revenues from the next quarter (company's guidance). This approach reflects well the rapidly growing revenues. See Figure 1. Each quarter is shown separately. Figure 2 shows Nividia's stock price on a logarithmic scale. A few weeks ago, investors had a moment of doubt and at the session on April 19, they sold Nvidia with a maximum decline on that day of even -11% at a price of $756.1. To date, the price has increased by over 40%. Figure 3 shows how Nvidia's stock price reacted relative to the S&P500 after the earnings release. Each of the last 6 quarters has yielded a higher return than the S&P500. After the publication of the last results on May 22, we are now 12.2% relatively higher than the S&P500. Finally, there is also good "news"... first, that in the short term, valuations do not have a major impact on the company's share price, and second, it can be expected with a high degree of probability that the bull market in Nvidia shares should last until the end of the bull market on the entire market (as was the case, for example, with Cisco Systems in the 1990s). This does not mean that significant corrections are not possible (e.g. in April this year, when the drawdown on Nvidia’s shares was 22.4% (intraday) and 19.8% at closing prices).

28-Aug-2024. Nvidia Earnings Preview. Overall, the most important for Nvidia’s results will be two things: (1) Q2 2024 revenue and EPS. Wall Street expects Q2 revenue of $28.35 billion and EPS of $0.63 per share. (2) and company’s guidance for Q3 2024. Wall Street expects Q3 EPS at $0.69 and Q3 revenue at $31.18 billion. For the full year, Nvidia is expected to guide EPS around $2.70, and revenue of $120.14 billion. One way to assess potential GPU demand is to look at what other Mag7 companies have said on the subject during recent earnings calls. Below are selected comments from recent earning calls.. (Meta, Microsoft, Alphabet, Tesla, Amazon) indicating potential demand for AI computing infrastructure. In the case of Apple, there was no direct reference to this. Figure 1 shows how often AI was mentioned during the earnings calls. Figure 2 shows Nvidia’s revenue and Wall Street expectations. Meta: Mark Zuckerberg: “The amount of compute needed to train Llama 4 will likely be almost 10x more than what we used to train Llama 3 -- and future models will continue to grow beyond that. It's hard to predict how this will trend multiple generations out into the future, but at this point I'd rather risk building capacity before it is needed, rather than too late, given the long lead times for spinning up new infra projects”. Llama 3.1 was trained on 16,000 H100s, and Llama 4 is going to have 10x more, i.e. 160,000 GPUs. Chat GPT-4 used 25,000 GPUs. Grok 2 … 20,000 GPUs (and Grok 3 is going to use 100,000). Susan Li, CFO: “We anticipate our full-year 2024 capital expenditures will be in the range of $37-40 billion, updated from our prior range of $35-40 billion. While we continue to refine our plans for next year, we currently expect significant capex growth in 2025 as we invest to support our AI research and our product development efforts”. Microsoft: AMY HOOD on CAPEX outlook: “To meet the growing demand signal for our AI and cloud products, we will scale our infrastructure investments with FY25 capital expenditures expected to be higher than FY24. As a reminder, these expenditures are dependent on demand signals and adoption of our services that will be managed thru the year”. Over the last 4 quarters Capex at Microsoft has been growing by 70-80% YoY (was $19bln last quarter). Alphabet: Sundar Pichai, CEO, on AI capex: “the risk of under-investing is dramatically greater than the risk of over-investing for us here, even in scenarios where if it turns out that we are over-investing, we clearly -- these are infrastructure which are widely useful for us. (…) But I think not investing to be at the front here, I think, definitely has much more significant downside”. Tesla: Elon Musk about Nvidia chips: “ (…) what we are seeing is that the demand for NVIDIA hardware is so high that it's often difficult to get the GPUs. And there just seems this -- I guess I'm quite concerned about actually being able to get steady out NVIDIA GPUs and when we want them”. Amazon: Andrew R. Jassy, CEO: “We remain very bullish on the medium to long-term impact of AI in every business we know and can imagine. The progress may not be one straight line for companies. Generative AI, especially, is quite iterative and companies have to build muscle around the best way to solve actual customer problems. But we see so much potential to change customer experiences. (…) We are investing a lot across the board in AI, and we'll keep doing so as we like what we're seeing and what we see ahead of us”. Brian T. Olsavsky, CFO: “For the first half of the year capex was $30.5 billion. Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads”.

22-Nov-2024. Beating as usual! Nvidia earnings review. As usual, Nvidia beat Wall Street expectations, both in terms of Q2 2024 results (the quarter ending July 31, 2024), but also provided guidance for the next quarter above market expectations.. and it has been the case for many quarters … see Figure 1. Looking at the main market narratives and investor sentiment … regardless of the earnings beat, probably Nvidia’s stock price would have fallen anyway. Two days after the results were released, Nvidia is down 4.97% (while the S&P500 is up 1.01%). Relatively, Nvidia is losing 5.97% to S&P500 - see Table 1. Historically (after the last 6 quarterly earnings releases) Nvidia has always beaten S&P500 - counting to the end of a given quarter, i.e. before the publication of the next earnings - see Figure 2. Table 1 (last column) shows higher rates of return compared to S&P500 from 4% to 47% (on relative basis). Key takeaways after the Nvidia’s earnings call: 1)It’s all about growth, growth, growth! Colette M. Kress : “Hopper demand is strong, and Blackwell is widely sampling. (…) Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal year '26. In Q4, we expect to get several billion dollars in Blackwell revenue. Hopper shipments are expected to increase in the second half of fiscal 2025. Hopper supply and availability have improved. Demand for Blackwell platforms is well above supply, and we expect this to continue into next year”. “NVIDIA H200 platform began ramping in Q2, shipping to large CSPs, consumer Internet, and enterprise company. The NVIDIA H200 builds upon the strength of our Hopper architecture and offering over 40% more memory bandwidth compared to the H100”. Currently, Nvidia sells chips on the Hooper platform (H100 and H200), the next platform will be Blackwell, and the one after that Rubin. 2)The next AI demand is "Sovereign AI" - nothing new, but Nvidia has given numbers for the first time … „Our sovereign AI opportunities continue to expand as countries recognize AI expertise and infrastructure at national imperatives for their society and industries. Japan's National Institute of Advanced Industrial Science and Technology is building its AI Bridging Cloud Infrastructure 3.0 supercomputer with NVIDIA. We believe sovereign AI revenue will reach low double-digit billions this year.” 3)According to Nvidia… generative AI is accelerating: more scale and compute; image generation; coding; general robotics; physical AI; synthetic data generation.. “And there are several things that are happening in generative AI. So, the first thing that's happening is the frontier models are growing in quite substantial scale. (…) And so, it's not unexpected to see that the next-generation models could take 10, 20, 40 times more compute than last generation. (…) The second is although it's below the tip of the iceberg, what we see are ChatGPT image generators. We see coding. We use generative AI for coding quite extensively here at NVIDIA now. And then general robotics. The big transformation last year as we are able to now learn physical AI from watching video and human demonstration and synthetic data generation from reinforcement learning from systems like Omniverse, we are now able to work with just about every robotics companies now to start thinking about, start building general robotics. And so, you can see that there are just so many different directions that generative AI is going. And so, we're actually seeing the momentum of generative AI accelerating”. 4)the world builds about $1 trillion worth of data centers NOW ! Jensen Huang: “(…) remember, the world is moving from general-purpose computing to accelerated computing. And the world builds about $1 trillion worth of data centers. $1 trillion worth of data centers in a few years will be all accelerated computing. In the past, no GPUs are in data centers, just CPUs. In the future, every single data center will have GPUs”. 5)Blackwell is a game changer “Blackwell is going to be a complete game changer for the industry. And Blackwell is going to carry into the following year. (…) remember that computing is going through two platform transitions at the same time. (…) which is general-purpose computing is shifting to accelerated computing, and human-engineered software is going to transition to generative AI or artificial intelligence-learned software”. “The Blackwell vision took nearly five years and seven one-of-a-kind chips to realize, the Gray CPU, the Blackwell dual GPU, and a colos package, ConnectX DPU for East-West traffic, BlueField DPU for North-South and storage traffic, NVLink switch for all-to-all GPU communications, and Quantum and Spectrum-X for both InfiniBand and Ethernet can support the massive traffic of AI”. 6)NVLink (5th generation) is a game changer Nvidia’s webpage: “Unlocking the full potential of exascale computing and trillion-parameter AI models hinges on swift, seamless communication between every GPU within a server cluster. The fifth generation of NVIDIA® NVLink® is a scale–up interconnect that unleashes accelerated performance for trillion- and multi-trillion parameter AI models”. Jensen Huang: “This is a very big deal with its all-to-all GPU switch is game-changing. The Blackwell system lets us connect 144 GPUs in 72 GB200 packages into one NVLink domain, with an aggregate NVLink bandwidth of 259 terabytes per second in one rack. Just to put that in perspective, that's about 10x higher than Hopper. 259 terabytes per second kind of makes sense because you need to boost the training of multitrillion-parameter models oNvidia Q3 2025 Earnings Review. Two days after the earnings release, Nvidia is down 2.7% (and -3.6% relative to S&P500). It seems that investors are skeptical about Nvidia’s continued rapid growth, just like they were a quarter earlier. Nevertheless, after the last 7 earnings releases, Nvidia has consistently outperformed the S&P500 through the quarterly earnings release date (outperforming the S&P500 by 3.7% to 44%). See Figure 1. From the bottom in October 2022 to today, Nvidia’s market cap has increased by 1152% (from $280 billion to $3.5 trillion). During the same period, Nvidia’s annualized quarterly revenue has increased by 536% (from $23.6 billion in Q3 2022 to $150.0 billion in Q4 2024). See Figure 2. For investors, the most important thing is the company's continued growth - in other words, how much longer can Nvidia grow at this pace... and indeed, quarterly (sequential) revenue growth has already slowed to about 7% in Q4 2024, but 7% quarterly is about 31% annually! For comparison, annual revenue growth for S&P500 companies was about 7% last quarter. Figure 3 shows Nvidia's revenue growth. How best to summarize the situation after the publication of Nvidia's next results? This is a further continuation of the tug-of-war between skeptical investors and optimistic Jensen Huang, Nvidia's CEO. The main arguments on both sides in the attached table.. enjoy!