The size of Bank of America, or
Two Caterpillars, or
Deere + American Expresses, or
Fedex + Heineken + Colgate Palmolive + Yum Brands
Sorry, what is?
$220bn – the increase in value of Nvidia’s market cap after hours
The increase, not the entire value of the next Trillionaire
Yes, but it’s because of AI – that’s been all the “rage” since we started Chatting to GPT
Yes, but you’d think after the “rages” in recent years, people would be careful of “raging”
What do you mean?
Well, remember when people paid $588 per share for Zoom in October 2020
because “on-line” meetings were “raging” and were going to change the world
I do
Well, they did “change the world” and we’re all still Zooming and Teamsing
Except Shareholders “raged” when they only reported 5c of earnings last quarter
admittedly a different kind of rage with the share down 90% at $68
Understandably so – imagine if you gave me $588 a few years ago and I only gave you 5c a few years later!
Yes, I think I’d also “rage”, especially if I never actually received 5c..
And remember when people were raging about “fintech & payment systems and the death of cash”
Yes, I do
And people “raged” for PayPal and paid $310 per share
Well, it’s now down 80% in less than 2 years
Yes, but Nvidia is “different”, they’re the “leader”
Oh and Zoom & Paypal weren’t leaders…?
Well, yes they were .. for a moment
You see, that’s the thing about competition, it catches up
People thought no one would catch Intel
Until Nvidia did
And now nobody thinks anyone will catch Nvidia
Until someone does
Anyway, tell me about Nvidia’s numbers
Revenue fell 13% year over year
Sorry, did you say fall?
Yes, but it increased $1bn from last quarter
I should hope so! Their market cap increased a few-large-companies’ worth from yesterday
What about EPS?
Down 20%
Down? Don’t their clients know that AI is all the “rage”…?
And free cash flow
$5bn for the last 4 quarters
Oh, so a FCF yield of only 0.5% – tricky to get rich at that yield
Oh no, you don’t get it in the form of dividends, you really need to work there and then get it in the form of buybacks of your exercised options
Good point!
And, did they buyback any shares?
No, even 0.5% is too rich for them..
But shares in issue did rise 1.5% in the quarter so it seems their staff who are cashing in options, don’t know about the “AI” rage either..
Look, their revenue guidance of $11bn suggests being up 64% y/y next quarter
Ok, so:
IF that forecast is accurate & they make $45bn next year up 76%, and
IF they make 50% net margins = 22bn, and
IF there are no other competitors on the horizon (keeping in mind all the tech spend by the big guys on R&D), and
IF AI is still “raging” and investors are willing to pay nearly 50x earnings
Then your return will be ZERO – no Ifs or buts
But IF any IF falls short
You’ll be the one “raging” like your Zoom & Paypals