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Cisco seems the most reasonable analogy to me. They were the ones selling shovels during the Internet boom. The Internet market is many orders of magnitude

Cisco seems the most reasonable analogy to me. They were the ones selling shovels during the Internet boom. The Internet market is many orders of magnitude larger today than it was during CSCO's peak. CSCO is still highly profitable but it's stock price is still well off its peak.

aurareturn 3y ago
Nvidia’s PE is still 3x less than Cisco’s peak.
- cdchn 3y ago
  So hold until Nvidia hits 200 P/E or play chicken with the bust of the AI bubble.
ksec 3y ago
>Cisco seems the most reasonable analogy to me. Cisco at its peak in 1999 had a P/E ratio of near 200. Nvidia trailing 12 months is closer to 50. ( Today it is closer to 60 ). So I dont think Cisco is a good comparison.
- TeMPOraL 3y ago
  AI gold rush is only just starting, though.
  - SilasX 3y ago
    Their competitors are only just starting too.
- bryanlarsen 3y ago
  I think P/S ratios are fairly comparable, though. Data going back that far is behind a paywall, so can't check.
  - acchow 3y ago
    Cisco’s peak was $79 at a $546bn valuation in March 2000. Their year ended July 2000 had $18.9bn revenue https://www.cisco.com/c/dam/en_us/about/ac49/ac20/downloads/annualreport/ar2000/pdf/Cisco_00_AR.pdf https://www.cisco.com/c/dam/en_us/about/ac49/ac20/downloads/... That’s a P/S of 29 (but one quarter in there is forward looking) NVDA’s year ended Dec 2023 saw $61bn revenue. All 4 of quarters in there are backwards looking. If you shave off the oldest one (7.2bn) and add on this current quarter (22bn forecasted), you get 75.8bn. Or a P/S of 26.4. It’s closeish
- cdchn 3y ago
  I think you potentially take the path Cisco took during the dotCom Boom and overlay it on the Nvidia trajectory during the AI Boom.
  - mbil 3y ago
    E.g. https://www.reddit.com/r/wallstreetbets/comments/1axctqq/for_all_those_brainlets_who_think_were_in_a_new/ https://www.reddit.com/r/wallstreetbets/comments/1axctqq/for...
  - AlexandrB 3y ago
    The problem with this kind of analysis is you have to bake in a bunch of assumptions. For example the Reddit link in the sister comment assumes that the x-axis scale stays the same and arbitrarily chooses a starting date and y-axis scaling to make the lines fit. This pre-supposed all kinds of things about where we are in this boom-bust cycle that may not be true.
- gizmo 3y ago
  Cisco had a 550bn market cap at the height of the bubble. That's a lot but NVDA is about to overtake Saudi Aramco in market cap. How much revenue can nvidia realistically have 5 years from now, and at what margins? 100bn in revenue (NVIDIA grossed 25bn last year, so 4x top line growth) at 35% gross margins = 35bn. Slap a 25x multiple on that and you have a 900bn market cap. Discounted at 8% to today that's .65 * 900bn is 600bn. Not 2000bn. Are my numbers too pessimistic? Probably. But still, it's hard to come up with 2029 numbers that justify a 2000bn market cap today. Even with a 5% discount rate NVDA has to be worth 3000bn 5 years from now, for current investors to get a 0% return.
  - nickfromseattle 3y ago
    > (NVIDIA grossed 25bn last year, so 4x top line growth Q4 revenue was $22B, and guiding $24B for Q1, so likely $110Bish revenue in 2024. Their net income should be in the same ballpark as Microsoft / Apple / Amazon / Google in 2024. Meanwhile, Apple / Amazon / Google are growing ~10% YoY, at Nvidia's current growth rate they could surpass Mag7 net income in 2025/2026.
    - gizmo 3y ago
      Apple's net income was 97bn last year, Amazon's net income was 10bn. I'm not sure why you would even put those in the same category. Amazon has historically been valued on their free cash flow. For nvidia to have 100bn in net income they would need at at least 200bn in revenue. Apple has 100bn in net income on 400bn in revenue, for comparison. Ultimately the question is whether nvidia's moat (chips + cuda) will be durable. My guess is competitors will arrive soon and that nvidia's margins will go down. Right now nvidia seems untouchable, but reality will set in sometime next year.
      - bryanlarsen 3y ago
        what I believe are safe predictions (no dates, to make them extra safe). - total market size will go up - Nvidia's market share will go down - Nvidia's profit margin will go down The trillion dollar question then is whether the uplift from #1 is bigger than the downdraft from #2 and #3.
rasz 3y ago
If Cisco then why not Nortel? The Company that Broke Canada - BobbyBroccoli https://www.youtube.com/watch?v=I6xwMIUPHss https://www.youtube.com/watch?v=I6xwMIUPHss

aurareturn 3y ago

Nvidia’s PE is still 3x less than Cisco’s peak.

cdchn 3y ago
So hold until Nvidia hits 200 P/E or play chicken with the bust of the AI bubble.

ksec 3y ago

>Cisco seems the most reasonable analogy to me. Cisco at its peak in 1999 had a P/E ratio of near 200. Nvidia trailing 12 months is closer to 50. ( Today it is closer to 60 ). So I dont think Cisco is a good comparison.

TeMPOraL 3y ago
AI gold rush is only just starting, though.
- SilasX 3y ago
  Their competitors are only just starting too.
bryanlarsen 3y ago
I think P/S ratios are fairly comparable, though. Data going back that far is behind a paywall, so can't check.
- acchow 3y ago
  Cisco’s peak was $79 at a $546bn valuation in March 2000. Their year ended July 2000 had $18.9bn revenue https://www.cisco.com/c/dam/en_us/about/ac49/ac20/downloads/annualreport/ar2000/pdf/Cisco_00_AR.pdf https://www.cisco.com/c/dam/en_us/about/ac49/ac20/downloads/... That’s a P/S of 29 (but one quarter in there is forward looking) NVDA’s year ended Dec 2023 saw $61bn revenue. All 4 of quarters in there are backwards looking. If you shave off the oldest one (7.2bn) and add on this current quarter (22bn forecasted), you get 75.8bn. Or a P/S of 26.4. It’s closeish
cdchn 3y ago
I think you potentially take the path Cisco took during the dotCom Boom and overlay it on the Nvidia trajectory during the AI Boom.
- mbil 3y ago
  E.g. https://www.reddit.com/r/wallstreetbets/comments/1axctqq/for_all_those_brainlets_who_think_were_in_a_new/ https://www.reddit.com/r/wallstreetbets/comments/1axctqq/for...
- AlexandrB 3y ago
  The problem with this kind of analysis is you have to bake in a bunch of assumptions. For example the Reddit link in the sister comment assumes that the x-axis scale stays the same and arbitrarily chooses a starting date and y-axis scaling to make the lines fit. This pre-supposed all kinds of things about where we are in this boom-bust cycle that may not be true.
gizmo 3y ago
Cisco had a 550bn market cap at the height of the bubble. That's a lot but NVDA is about to overtake Saudi Aramco in market cap. How much revenue can nvidia realistically have 5 years from now, and at what margins? 100bn in revenue (NVIDIA grossed 25bn last year, so 4x top line growth) at 35% gross margins = 35bn. Slap a 25x multiple on that and you have a 900bn market cap. Discounted at 8% to today that's .65 * 900bn is 600bn. Not 2000bn. Are my numbers too pessimistic? Probably. But still, it's hard to come up with 2029 numbers that justify a 2000bn market cap today. Even with a 5% discount rate NVDA has to be worth 3000bn 5 years from now, for current investors to get a 0% return.
- nickfromseattle 3y ago
  > (NVIDIA grossed 25bn last year, so 4x top line growth Q4 revenue was $22B, and guiding $24B for Q1, so likely $110Bish revenue in 2024. Their net income should be in the same ballpark as Microsoft / Apple / Amazon / Google in 2024. Meanwhile, Apple / Amazon / Google are growing ~10% YoY, at Nvidia's current growth rate they could surpass Mag7 net income in 2025/2026.
  - gizmo 3y ago
    Apple's net income was 97bn last year, Amazon's net income was 10bn. I'm not sure why you would even put those in the same category. Amazon has historically been valued on their free cash flow. For nvidia to have 100bn in net income they would need at at least 200bn in revenue. Apple has 100bn in net income on 400bn in revenue, for comparison. Ultimately the question is whether nvidia's moat (chips + cuda) will be durable. My guess is competitors will arrive soon and that nvidia's margins will go down. Right now nvidia seems untouchable, but reality will set in sometime next year.
    - bryanlarsen 3y ago
      what I believe are safe predictions (no dates, to make them extra safe). - total market size will go up - Nvidia's market share will go down - Nvidia's profit margin will go down The trillion dollar question then is whether the uplift from #1 is bigger than the downdraft from #2 and #3.

rasz 3y ago

If Cisco then why not Nortel? The Company that Broke Canada - BobbyBroccoli https://www.youtube.com/watch?v=I6xwMIUPHss https://www.youtube.com/watch?v=I6xwMIUPHss