NVIDIA stock isn't overvalued. Here's why.
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- Опубликовано: 15 фев 2024
- NVIDIA stock has been rallying lately due to extraordinary demand for their GPUs for AI applications such as ChatGPT. With the stock up over 200% in the past year versus a 40% return of the Nasdaq, investors may be left wondering whether NVDA stock is overvalued. Today we'll analyze NVIDIA stock using our simple valuation ratio as well as the traditional P/E ratio, and we'll do it step-by-step so you can do the same. Turns out you can make a case for NVIDIA stock not being overvalued using the middle of guidance given by nearly 40 analysts who follow $NVDA. That's by comparing it to a benchmark such as the Nasdaq. Watch the video to see how we did this, and then let us know if you think NVDA stock is overvalued.
RESEARCH PIECES USED IN THIS VIDEO:
1. NVIDIA’s Growth is Stalling: Why We’re Not Worried
www.nanalyze.com/2023/03/nvid...
2. The Artificial Intelligence Stock That Rocked Wall Street
www.nanalyze.com/2016/11/arti...
CHAPTERS:
00:58 Our agenda
01:45 NVIDIA's historical return
03:21 Three reasons to sell NVIDIA
04:33 Our simple valuation ratio
06:42 Price to earnings ratio
09:30 Using a benchmark
10:43 Forward PE calculations
11:40 Considerations
13:27 Summary
ABOUT US:
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Read all the Nanalyze Premium articles you'd like for free! Sign up for a 30-day trial of our monthly subscription with no strings attached: www.nanalyze.com/subscription...
DISCLAIMER: Our content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, along with independently researching and verifying, any information contained within our RUclips videos or on our website, whether for the purpose of making an investment or otherwise.
$NVDA
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![The Meteoric Rise of Nvidia [Fastest Growing Stock]](http://i.ytimg.com/vi/nVtb2vNUOdU/mqdefault.jpg)
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Loving the content!
We love to hear that, thank you!
Congrats to 20.000 subs!
Thank you! It's good to see the channel gaining a bit of momentum.
Great analysis! Well thought through, and well delivered. I look forward to more of your great content!😊
Thank you very much for the kind words Richard!
The title of your video caught my eye, but I don't think you said anything on why NVIDA isn't overvalued.
That's what the presenter shows you in the video by comparing the expectations of what NVIDIA will do against the valuation of Nasdaq. It's all in there, just give it a watch ;)
He’s trying to teach us to fish
@@liltunafish1471 You got it!
Thank You !
You're very welcome!
"Torture the data" has to be my new favourite phrase. When teaching my daughter about central tendencies and basic analysis of a data set, I've been absolutely hammering home the point that people will ascribe (often quite arbitrary) meaning to data all day long, and it's her job to take all of it with a grain of salt and do the math before forming an opinion or believing some pundit's story.
Very well put, thank you!
I agree. Sending money to your own start ups that they may then place orders which are IOUs then sending those funds back to generate more IOUs is very smart and not illegal. Company ABC can do that forever, declare ever rising B to B revenues and swell the valuations with no ceiling. It was done to great success in 1999-2000 and 2007-2008. Like an endless beach party!
Was roundtripping money discussed in this piece? Because I presented this video and I don't recall talking about that. ;) Joe P.
you did not, but someday soon everyone will be re. NVDA.
@@Nanalyze
Great job covering Nvidia the last few years. I missed this one. 😢
Thank you! Not to worry. Somewhere out there tomorrow's trillion dollar companies are just getting started.
Have you done an analysis on EOS Energy?
We have not, but are always taking requests on our Discord server ;)
When I watch your videos I feel like I'm being blessed by an angel.
A fallen angel maybe ;)
Fantastic example
Thank you! These ratios are a but more complicated than they seem, and it's good to walk through them every now and then.
Positions or ban
Not sure what you're on about there Willis
Why try non-gaap first? Might be a dumb question
Never any dumb questions. Just trying to keep things simple.
Thanks. Ive been buying more @ 700
Someone certainly is otherwise there would be no bids around that price level.
May i know roughly what % of the portfolio would u consider "overweight" and ready to trim?
We have to save something for Premium subscribers, the people who pay our bills. For every investor, they need to consider what percentage of their wealth they're willing to have exposed to a single company (needs to be calculated at an AUM level, not a portfolio).
Noted thanks for the reply!@@Nanalyze
Good video. But the volume was way too low.
We used new editing software so we'll make a note of that going forward, thank you.
Used Simply safe dividends forward pe.. Saw it dip much lesser than the 5 year average pe at around New Year '24 and bought it.
There's a case to be made that Mr. Huang will keep seeking new sources of revenues, not just push the envelope in chip architecture technology.
That's why it's very important to watch growth in their other operating segments. They have a massive cash cow, now they need to use it to fuel more growth.
why would anyone be selling off Nvdia before the most anticipated earnings report ?? I am not selling... as i didn't when it went to $300 & everybody seemed to think that was high as it would go.. but still makes no sense... Any opinion??
Anyone's opinion on when you should sell NVIDIA and $5 might get you a chili at Wendy's (no cheese and onions though). 🍲
@@Nanalyze Lol!!
They seem to have NO vision.. just copy each other
@@user-ef1ng8th5l Got to play the long game. We've thought this through well before the hype. When things get too heated, it becomes tough to make decisions.
@@Nanalyze So funny but true... I want the cheese onions & the crackers!!!😛😜🤪
Yeah I've been stuck on a dilemma myself.
I love me some insurance stocks, and my favorite KNSL jumped 20% today, and now I'm at a 40% gain. 👀
I've wondered if I should wait for price to come down from $513. But... gotta train myself to look at metrics, not just price alone lol
YT financial gurus get all excited when stock prices "moon" but the truth is that volatility never does investors any favor, especially those in it for the long haul.
I love my tulip bulbs.
Sure we can't tempt you with some more? ;)
I sold a while ago. Don't regret it. I guess I could have made more, but this AI hype makes me cringe. Somebody is going to be left holding that bag at the top. A lot of somebodies. Plus the channel stuffing allegations going around are concerning. Best to part with the herd when this type of frenzy is in motion. @@Nanalyze
@@vdanger7669 The AI hype is very cringe which is why we try to use valuations to put things into perspective. Your approach is good. No FOMO.
I saw it draw cartoons. So too the moon for 2 years straight is smart play lmao!
@@KenjiEspresso Smells like dot com times
The current valuations seem fair, but they heavily rely on analysts' predictions being right. These predictions anticipate remarkable growth based on the speculation of an entirely new industry emerging, and Nvidia dominating that space. However, this industry remains unproven. This situation is reminiscent of what occurred with Tesla: analysts made overly optimistic forecasts based on the assumption of a substantial increase in global electric vehicle adoption while maintaining the margins they had. Now, Tesla's stock is trading at around 50% below its all-time high, illustrating the risks associated with such speculative growth projections. IMHO. Great content by the way.
Well put, thank you for taking the time to share a useful perspective. The valuation of NVIDIA can be argued strongly either way simply by taking the most optimistic/pessimistic analyst forecasts and using the to calculate forward P/E. The truth is, all of these analysts could be wrong because nascent technologies have a way of surprising just as you said. Glad you're enjoying our content!
Just seeing the ticker makes me feel like an idiot. I had a very small position in the company and sold way too early. It was really the only stock I had that far exceeded expectations. Now struggling to find a buy in point on this seemingly infinite upward spike.
No FOMO. Don't chase story stocks. Continue on with your investing journey and know that one thing is absolutely certain - you will not buy at the bottom, or sell at the top, and you will always feel regret unless you learn to ignore those FOMO feelings and just get on with dollar cost averaging into quality assets.
@@Nanalyze It's not a bad move if you sold and made money. Sure, you wish you didn't now. Research other AI companies that have relations with Nvidia that are a cheaper buy. TSM or Palantir or AMD
@@blackhawk32b4 We cover 460 tech stocks and hold 37 so we're definitely canvassing what's out there. And the names you cite are not necessarily "cheaper." As the video pointed out, you can torture the data and make it say anything you want. There is a LOT of AI hype going around right now.
NVDA has run too high too fast for my comfort.
Agree. Volatility like this does investors no favors.
Nvidia has a PEG ratio below 1. Just by comparison Apple's is over 2. Maybe take that into consideration, as the plain and simple P/E metric can be quite misleading.
You can certainly look at PEG, but it might be misleading because you're comparing slow (likely) sustainable growth to extremely rapid growth driven by hype that's not likely sustainable. Here at Nanalyze we keep things extremely simple which is why we largely stick to our simple valuation ratio for disruptive tech companies. Once they're sustainably profitable and start resembling more value, then switching to P/E makes sense.
Thanks for the valuation insights, nonetheless valuation only useful for financings, haven’t said that; is this video completed with AI software? because it looks that way 😂 so I say the AI isn’t the future, it’s now😂
Certainly the new offering from OpenAI could be used to generate what they call "B-roll." For now this is all underpaid MBAs doing the work. ;)
P/S as a measure of value for a cyclical company? Really? WHY?
The video is showing people how to value companies using two methods: our own SVR and the often-used P/E ratio, the latter of which is used to arrive at the video's conclusion. You can learn more about how SVR is used here: ruclips.net/video/usoSYjDndYM/видео.html
Factor in this. China stocks investors are very eager to transfer to S&P. What d u think their considering.
We covered the China story here: ruclips.net/video/np6_Zeu960U/видео.html
How are people even comparing NVDA to Amazon, Google, Microsoft -- a company that just resells stuff, an old search engine and an old software company....ZZZZZZZZ! BORRRRRING!!! NVDA Zis the FUTURE!!! The future is NOW!!!! NVDA should be worth all of these companies and MORE! NVDA $1,000 is a layup next week! NVDA $2,000 this year: SOOOOOOOO EASY!!!! Likely NVDA $5,000 by next year! STOP comparing this to sleepy old companies! NVDA is EVERYTHING!!!! It will be EVERYWHERE! In everything we do -- we will stop thinking and just NVDA!!! Forget about technicals, fundamentals, company performance....this isn't the 1980s!!! Listen to Cramer! Market cap of $10T is a GIMMMME! Should be $25T -- NVDA is EVERYTHING! How can civilization go on without it... SERIOUSLY PEOPLE!!! JUST BUY! BUT! BUY! and don't be left behind!!! NVDA should have a value equal to the other 499 SP500 companies and more! NVDA 10,000 by the end of 2025 seems so obvious!!!
We're not going to lie. Your sense of humor is right up our alley.
But NVDIA has the cutting edge AI technology that can be leveraged to improve its innovation. Market share, monopoly, data, etc. makes sense for Netflix, FB, and Google. But to be able to use your own products to fuel your own R&D? That's the calculation that is kind of impossible to make.
Very good point. That's what they say of course in the same way Synopsys uses AI to better design AI chips. The only ground truth here (in the face of all this hype) will be revenue growth for their other operating segments which is very easy to track. Operational efficiencies will be evident in bottom line margins.
@@Nanalyze its evident that they're also starting to expand across industries, from military to entertainment, in a far different approach from AMD and competitors. AMD would likely devise specialized technologies for certain industries or companies like Tesla, NVIDIA is leveraging its power and wealth to revolutionize whole industries and have a complete monopoly over said industry. That's positioning that is also impossible to quantify.
That's a great story, but we invest in what companies have today. As you said, impossible to quantify.
AI is the next great fad. I needs overseers which negates teh saved jobs it's suppose to create. Its also hallucinates
@@brandonlagrange5307 spoken like someone who doesn't understand anything about technology
NVDA is only overvalued when it hits $10,000. Any time NVDA is under $10,000, it is cheap. Buy NVDA all day long.
You can get more clout if you add a few more zeros
NVDA has competition right on the horizon and is mildly overvalued imho. But if you can get rich do 33T!!!!!
@@KenjiEspresso We looked at AMD in that context here: ruclips.net/video/SGOumcdPtLw/видео.html
Why not 11,000 or 9,000. Should be 600,000 imo
@@HeroDai2448 And use leverage too. When you are absolutely certain a stock will become a kajillion-bagger, the only sensible thing to do is mortgage the farm and leverage that bet. Hero or zero baby! ;)
I didn’t watch this when it came out. I have sour grapes that I didn’t get it long ago. Then I was afraid it’s too late. I avoid fomo by looking at my index funds…. Oh there it is. Lots of nvidia, it’s there in my s&p index and also in my semiconductor index. I’m not missing out after all and sleeping at night. I’m not waking up rich but I am making a good return.
Wish I had bought it though.
We hear people say this a fair amount and remember this. Just because you invested in NVIDIA doesn't mean you would have made life-changing returns. You would have had to put in a meaningful amount, then you would have had to held that through thick and thin, then you would have known when to sell, etc. We've held for a long time and trimmed for a long time so we've made a lot of money on the stock. We don't have FOMO or regret because we didn't buy at the bottom or sell at the top. Those huge gains also help offset losses that are inevitable when you have a tech portfolio that target the most exciting themes out there. Just ask synbio investors how they're faring (gene editing aside). That theme is way more exciting than AI chips and it's destroyed loads of value. You are going to be wealthy if you DCA into index funds over decades. Not to worry.
History always repeats itself. Companies are overvalued now until they generate more value for the society as time passes.
It may not repeat itself, but it certainly rhymes ;)
Nvidia is a cool stock!
It's all fun and games until the stock crashes 30% after hours because earnings came in bad due to "inventory problems." ;)
what is he talking about... SVR and some ratio...?!??
SVR -> ruclips.net/video/c_cMdOTMbD4/видео.html
No Forward BS PE/s required................"The MARKET makes no sound & is the ONLY thing you listen to"
Alrighty then. (Slowly backs out of room.)
people are so susceptible to the anchoring bias and are unable to understand exponential growth.
We're simply showing people how one might make a case for the company being fairly valued.
@@Nanalyze I'm not talking about you guys, I'm talking about all the naysayers thinking that things can't grow quickly because they can't grasp exponential technologies. You guys are intelligent, you won't make that mistake
We're not making a claim either way. This video is simply an example of how one might make an argument for NVIDIA not being overvalued using forward P/E.
Not fair anymore at current prices
That may be so, but we would have to run the math using the current midpoints and the same methods used in this video for an apples to apples comparison. 🍎2🍎
@@Nanalyze nevertheless I still think that competitive advantage of Nvidia’s hardware over customer silicon like TPU is flexibility and this is an advantage for training and inference new multimodal models for video, sensors, 3D movement, Mobile metadata, Gesture analysis , we can already see over the corner of the availability of text data bottleneck . Any structure data will need massive and flexible hardware infrastructure.
Not a fan of the new editing style with random stock footage. Just slides (and occasional memes) please.
Noted. Thank you very much for the feedback! This was our most popular video ever (by far), and we suspect some of that comes from keeping the viewer's attention using "b-roll" and movement as opposed to still slides. If this channel doesn't start growing way faster it's just not worth our time, so we need to experiment to see how our videos can attract a far bigger audience. Can we please hear from some more regular viewers on how they feel about this new editing style so we can keep our audience in mind as we evolve? Thank you for the feedback, it's very valuable. Joe P.
@@Nanalyze Lots of views because of the stock and your excellent analysis/presentation.
I think take care with the stock footage at Eric says, as it can seem unrelated. But test and see with another stock! ;-)
@@gastongeneral6861 Good point on stock footage. I agree that (in the recent Brain Chips video intro) it seems unrelated. Showing video for the sake of showing video doesn't really work well. We'll cut back on that. The very quick clips I think (meme style ish) have good timing and serve to break things up. Animating slides can also be helpful. Thank you for the feedback. More please! Joe P.
This video was way too basic. Felt like watching a video made for high schoolers
Correct.
Nvidia will be 1000 in a year
This is the "throw something and see what sticks" approach to financial analysis. Pull some random number out of the air and hope you're right. If you are, come back and tell everyone what a Nostradamus you are. If you're not, sweep it under the rug. ;)
That's 37% yoy for 25 years for anyone who was wondering.
Nice factoid, thank you!
@@Nanalyze (ending price/starting price)^(1 / # of years)
RRI function in Excel does the same :)
Nice little shortcut you listed
This is where you are wrong, let me enlighten you.
Nvidia is overvalued currently, considerably.
Why? Because their hardware is not unique, and that is 90% of their business (the hardware) and 100% of what is driving the stock price.
Nvidia are currently sitting ducks and they know it, Intel and AMD are catching up with them now and it wont be long until they are also serious contenders in the AI compute domain.
Maybe the next generation, maybe 3 generations (consumer GPU card release generations), I predict Nvidia will see serious competition to their hardware in just under 1.5 years from now and in 5 years maximum they will no longer be a market leader as they are now.
Nvidia even admit their hardware is at risk, Jensen in public talks says "It's not about the chip it about the service, how we get that data to you and the value it has to the end customer". Nvidia are pivoting towards software, not hardware, and they are terrible at software. Really really bad.
With their hardware at serious risk of market competitors that are and will be fast catching up in the AI compute space, all that leaves them with is software aka the Omniverse which is so badly executed it's a joke. Even if they improved on that issue, it's not enough to keep their stock valued as high as it is.
With that in mind, their stock price is likely to plummet very soon, the gold rush on NVDA is over.
Invest in the company, not the stock price, it seems you made a considerable error in your analysis.
I pay very close attention to Nvidia, all of their research projects, discussion boards, every talk with Jensen, I have the technical ability to make judgements on their software and the experience to judge the markets and the position of their hardware in said markets.
Omniverse is touted as the future of Nvidia, and it's plain to see it is a Fugazi. This is the red flag, the warning beacon, the end times, they have passed "peak oil" or "peak silicon" it's time to abandon ship.
Thanks for the enlightenment Ben. We've decided to close shop because of all the what-ifs you've laid out at our feet. ;) What you ought to do next is watch the video we put together so maybe you can understand the point it was trying to make. Your comment, "their stock price is likely to plummet very soon" leads us to believe you might be employing a Romanian fortune teller too? Smart move.
After you've watched the video you just commented on, you may want to watch the one we did on AI hype (ruclips.net/video/CK8u0wytjEQ/видео.html) and the one we did on what NVIDIA needs to do to ensure they stay relevant (ruclips.net/video/02RY0B4SknI/видео.html). They're quite enlightening.
PS: Probably the quote we most use around here is invest in companies, not stocks. Welcome to Nanalyze :)
And what you'll find after you watch the videos we've produced is that we don't disagree with you. We've been invested in NVIDIA since it was a $40 billion company and we're always the most critical of our largest positions. When you are the leader, that is when you should worry the most.
Nvidia is unbelievably overpriced. I think the fair value is about $350 per share or $862b market cap.
Nvidia doesn't have nearly the manufacturing advantage that they used to have regarding GPU's and that gap is decreasing year over year.
LLM's have been around for nearly half a decade and there is a very small economic moat regarding their development.
The amount of competition in the LLM space is MASSIVE already which shows their is plenty of computing power to develop them on short order. There is also very little reason to think that Nvidia will hold its #1 for more than a couple years......
Personally I think people are over hyping AI to a embarrassing degree. I mean Siri came out in 2011............for 13 years we've been living with complex consumer AI in our pockets. That leap was far more impressive than a LLM that regurgitates the first 3 links it scrapes off google.
As far as video and image generation, sure its cool, but it's only going to affect entertainment and art.
And concerning AI modeling for scientific applications? Yes, its absolutely going to be another tool for doctors, architects, pharmacist, financial analysists, engineers to run their thoughts by, but it isn't nearly comparable to the revolution brought about by the Internet, Computing, or even Radio transmission.
AI will absolutely leave a mark on society, but I think people need to curb their expectations.
We are getting dangerously close to "Jetsons" type thinking..........and I don't see any flying cars around today
Here is another example..............remember the "Internet of Things"
I had so many lectures in college that tossed that phrase out at nauseum as if it was some huge development.
Guess what that developed into? It turned into a bunch of angry consumers wondering why their refrigerator needed to be connected to WiFi.........
But for a while there people were CONVINCED that EVERYTHING was going to be connected to the internet and that it would be beneficial to do so
Turns out people don't want their cars, appliances, or homes in general to be unnecessarily wired into the web. The only good thing to come of the ENTIRE "Internet of Things" concept was smart TV's.......that was the only purely positive/logical implementation of it
Thank you for sharing your thoughts. Since the presentation was based on using valuation ratios to prove that NVIDIA is undervalued or overvalued then you would be using the low range of the analyst estimates for 2025. Let's do that math. $694 / $15.08 = 46. So to arrive at the Nasdaq average P/E of 32 we can back that out. We get $482 a share. Way off from your estimate. So, it appears that you expect 2024 EPS for NVIDIA to be roughly $11. Got it. Now we assume that you're not just pulling some arbitrary price out of the wind and you used some valuation methodology to arrive at $350 because that's what this entire exercise was about - using valuations to justify the a) the current price and b) the arbitrary price targets people pull out of the air ;) Joe P.
Yes. IoT, carbon nanotubes, crapto, blockchain, ICOs, NFTs, graphene, dot bomb, we can cite examples of hyped up technologies all day long too. We don't disagree with you. That's not what this video was about. It was about trying to justify whether or not you think the company is under/over valued using financial valuation metrics.
@@Nanalyze I get that, I guess my comment was referring specifically to the alarm bells surrounding the entire business model.
In regards to the specific valuation's given by mainstream "analysts": I think the P/E speaks the loudest against them..............
Remember the days when a P/E above 20 was a bad sign?
The historical P/E for the S&P 500 since 1971 has been 19.4..............so a P/E 400% larger than the historical average should be setting off alarm bells.
Also look at the timing of all this. I don't buy the narrative that this is driven by advancements in AI. Like I said LLM's and generative AI is very old news. Remember Google's "Deep Dream" project? That was released nearly a decade ago in 2015.
I personally think this really has to do with the Fed's imminent capitulation in the inflation fight.
The fact that investment firms are willing to load up AGAIN on Big Tech stocks (especially known losers like META) says that the dollar is about to implode. Aka: "its better to hold the most overvalued (High PE) stocks than USD"
@@fishjohn014 Good comment. Thank you for the added color. So you are challenging the P/E of Nasdaq at 32 against the historical average of 19.4 which means everything is inflated. Couple that with inflated expectations for NVDA and you arrive at a strong belief that NVIDIA is overvalued. That makes sense.