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The absolute number of $3.5T market cap seems high. But Nvidia's earnings last quarter were $17B. Annualized that is $68B. The PE ratio calculated by current m

The absolute number of $3.5T market cap seems high. But Nvidia's earnings last quarter were $17B. Annualized that is $68B. The PE ratio calculated by current market cap of $3.5T divided by that annualized earnings is 52. Not unusual for a growing tech company. I remember the arguments I hear here on HN these days "No company can be that big and still grow. Also competition will catch up!" from the early 2000's when Apple's market cap crossed $100B. And from 2017 when Tesla's market cap crossed that of BMW. It's not that easy. Companies are moving targets. Their future will be determined by revenue factors that are not generating any revenue today. With Apple it was the iPhone. With Tesla it was self-driving. With Nvidia it will be ... ?

cameldrv 2y ago
3500/68=51.5
- ArtTimeInvestor 2y ago
  Thanks, fixed.
acchow 2y ago
The growth is one thing, but maintaining gross margins of 76% in big tech is quite challenging. Ignoring AI bubble risk, in the near term, their main risk is margin compression
- tonyedgecombe 2y ago
  Yes, the big difference between them and Apple is Nvidia’s customers would jump in a flash if one of their competitors offered a better price performance ratio. Judging by the history of this industry that seems inevitable.
  - pjmlp 2y ago
    Apple had similar problem in the last century. They have a nice money cushion nowadays, but mankind isn't going to keep rebuying iPhone and iPads forever.
  - ivewonyoung 2y ago
    CUDA has been a decent moat.
  - wruza 2y ago
    Seems evitable to me, given how poor software-wise are competitors and how hard it is to make software quickly. Afaiu, Nvidia is a software company. It chose a headstart of a decade. GPUs are just a platform for running it, in a sense. It’s Nvidia who could run on a competitors GPUs if it wanted, but not vice versa. With own GPUs it has a full lock-in mechanism. Judging by the history of this industry that seems inevitable. You mean games?
  - Bombthecat 2y ago
    But developers won't, they will stick to cuda
- Prbeek 2y ago
  Those margins also attract othertech firms to get into the industry either to compete with you or to cut costs because you are overcharging them.
  - acchow 2y ago
    Yes, competition is what causes the margin compression.
- Jlagreen 2y ago
  Nvidia's gross margins have been 50% with gaming cards only a decade ago. They have been above Apple's since back then. And Nvidia had grown them to 65% even before the AI craze. They main reason why it becomes so crazy is that demand exploded and with it unit shipments which have grown gross margins and net profit insanely. Nvidia's management has the best track record in the industry concerning margins. Jensen himself said that he says no to business opportunities if he thinks the margin there is too low. That's why Nvidia has left consoles and left it to AMD almost entirely. Nintendo Switch is an exception because Nvidia could there simply deliver a developed shelf product and skipped the huge effort of developing a console specific chip.
addicted 2y ago
> I remember the arguments I hear here on HN these days "No company can be that big and still grow. Also competition will catch up!" from the early 2000's when Apple's market cap crossed $100B. Early 2000s the iPhone hadn’t been invented. Apple’s market cap would be a tiny fraction of what it is today if they had remained a Mac + iPod + software company. Apple’s genius has been their ability to enter and dominate (and sometimes create) completely new markets. Since the early 2000s, the following new markets have all eclipsed the Mac or the iPod in annual revenues for Apple: iPhone iPad Services Accessories Basically, whatever company Apple was in the early to late 2000s, is the least financially significant bit for Apple today.
- ArtTimeInvestor 2y ago
  > Early 2000s the iPhone hadn’t been invented That was my point. Companies - especially tech companies - go through phases. Apple is now a phone company, Microsoft a cloud computing company, Tesla an AI company ... The value of a tech company is not in their current product line. It is in the product lines they will build in the future.
  - acchow 2y ago
    iPhone sales make up 46% of Apple's revenue, so it has expanded beyond just being "a phone company". They offer an integrated experience across their products.
    - ArtTimeInvestor 2y ago
      Another 28% is services, a good chunk of it is probably fees charged for the Appstore which is part of the phone? The growth of the Appstore business is another example of what I am trying to convey here. That companies are moving targets. When the iPhone came out, people were estimating how fast the competition could catch up with the hard- and software. AFAIR appstore fees were not a part of the discussion back then.
  - Jlagreen 2y ago
    And what many don't understand Nvidia is an accelerated computing company today which is something which will benefit almost any industry. Compute power from Nvidia's ecosystem can benefit everything and Nvidia is working on growing the ecosystem with HW + Networking + SW. Nvidia's data centers as ecosystem will become as flexible in doing whatever you need as the PC and Smartphone became that way. And that is their real moat. They will have competition in many specific areas but no one will compete with Nvidia solutions on a global scale of applications.

cameldrv 2y ago

3500/68=51.5

ArtTimeInvestor 2y ago
Thanks, fixed.

acchow 2y ago

The growth is one thing, but maintaining gross margins of 76% in big tech is quite challenging. Ignoring AI bubble risk, in the near term, their main risk is margin compression

tonyedgecombe 2y ago
Yes, the big difference between them and Apple is Nvidia’s customers would jump in a flash if one of their competitors offered a better price performance ratio. Judging by the history of this industry that seems inevitable.
- pjmlp 2y ago
  Apple had similar problem in the last century. They have a nice money cushion nowadays, but mankind isn't going to keep rebuying iPhone and iPads forever.
- ivewonyoung 2y ago
  CUDA has been a decent moat.
- wruza 2y ago
  Seems evitable to me, given how poor software-wise are competitors and how hard it is to make software quickly. Afaiu, Nvidia is a software company. It chose a headstart of a decade. GPUs are just a platform for running it, in a sense. It’s Nvidia who could run on a competitors GPUs if it wanted, but not vice versa. With own GPUs it has a full lock-in mechanism. Judging by the history of this industry that seems inevitable. You mean games?
- Bombthecat 2y ago
  But developers won't, they will stick to cuda
Prbeek 2y ago
Those margins also attract othertech firms to get into the industry either to compete with you or to cut costs because you are overcharging them.
- acchow 2y ago
  Yes, competition is what causes the margin compression.
Jlagreen 2y ago
Nvidia's gross margins have been 50% with gaming cards only a decade ago. They have been above Apple's since back then. And Nvidia had grown them to 65% even before the AI craze. They main reason why it becomes so crazy is that demand exploded and with it unit shipments which have grown gross margins and net profit insanely. Nvidia's management has the best track record in the industry concerning margins. Jensen himself said that he says no to business opportunities if he thinks the margin there is too low. That's why Nvidia has left consoles and left it to AMD almost entirely. Nintendo Switch is an exception because Nvidia could there simply deliver a developed shelf product and skipped the huge effort of developing a console specific chip.

addicted 2y ago

> I remember the arguments I hear here on HN these days "No company can be that big and still grow. Also competition will catch up!" from the early 2000's when Apple's market cap crossed $100B. Early 2000s the iPhone hadn’t been invented. Apple’s market cap would be a tiny fraction of what it is today if they had remained a Mac + iPod + software company. Apple’s genius has been their ability to enter and dominate (and sometimes create) completely new markets. Since the early 2000s, the following new markets have all eclipsed the Mac or the iPod in annual revenues for Apple: iPhone iPad Services Accessories Basically, whatever company Apple was in the early to late 2000s, is the least financially significant bit for Apple today.

ArtTimeInvestor 2y ago
> Early 2000s the iPhone hadn’t been invented That was my point. Companies - especially tech companies - go through phases. Apple is now a phone company, Microsoft a cloud computing company, Tesla an AI company ... The value of a tech company is not in their current product line. It is in the product lines they will build in the future.
- acchow 2y ago
  iPhone sales make up 46% of Apple's revenue, so it has expanded beyond just being "a phone company". They offer an integrated experience across their products.
  - ArtTimeInvestor 2y ago
    Another 28% is services, a good chunk of it is probably fees charged for the Appstore which is part of the phone? The growth of the Appstore business is another example of what I am trying to convey here. That companies are moving targets. When the iPhone came out, people were estimating how fast the competition could catch up with the hard- and software. AFAIR appstore fees were not a part of the discussion back then.
- Jlagreen 2y ago
  And what many don't understand Nvidia is an accelerated computing company today which is something which will benefit almost any industry. Compute power from Nvidia's ecosystem can benefit everything and Nvidia is working on growing the ecosystem with HW + Networking + SW. Nvidia's data centers as ecosystem will become as flexible in doing whatever you need as the PC and Smartphone became that way. And that is their real moat. They will have competition in many specific areas but no one will compete with Nvidia solutions on a global scale of applications.