Time for some grossly oversimplified back-of-the-proverbial-envelope value crunching! …

It seems fairly obvious, to me, that the issue is that most people make money from the stock price changing rather than from any kind of intrinisic value of the underlying company. In other words, why should it matter to me what the company's profit margin or asset base or what not is actually worth when I make money if the stock number goes up?

Nvidia's trailing P/E ratio is 53 (stock hitting a new high today). Its forward P/E ratio is 38. A year ago both its trailing and forward P/E were higher. So the stock is relatively a bargain compared to what it was a year ago. The price implies that revenues and profits are expected to continue to grow. > My intuition is that the absence of the rapid, generationally transformative, advances in tech and industry that were largely seen in the latter half of the 20th-century (quickly followed with smartphones and social networking), stock market investors seem content to force similar patterns onto any marginally plausible narrative that can provide the same aesthetics of growth I wouldn't disagree with this.

NVDA's current forward P/E ratio (price to earnings) is about 37. That means if we hold constant the profit earnings, if you bought the whole company at its current valuation ($4tr), it would take you 37 years to break even. Is this reasonable? Depends on sector and growth potential. To me, this is a "fair" valuation and not overly inflated based solely on existing earnings.

You are way off. A single B200 costs $70k. They sell them in racks for over $3mm each. And they have 55% net profit margin.

>I’ll assume the average GPU price, for the sake of argument, is $1000. They make big bucks on the premium end of their chips. Those contracts are typically on the 8-figure range, I would think they easily have thousands of them around the world. Even Jensen has implied[1] that the consumer GPU market (i.e. gaming) holds a minor share of revenue these days. 1: Citation needed, I know. I mean comments like "we are not going to abandon gamers, etc...".

Thing is, NVIDIA ships waaaay more than GPUs. Or, perhaps more accurately, NVIDIA ships chips . Other manufacturers install those chips. Sitting in my office right now, I have 5 computers, and between them I'd estimate I have 15 NVIDIA chips, minimum. Maybe more, I haven't carefully examined my NVIDIA-based, ASUS-manufactured graphics card to see how many name-brand chips it has. That's to say nothing of all the other products and services they build. I just visited their website, clicked on "solutions" at the top, and there's waaaay more there than just desktop GPUs. And its worth noting that NVIDIA doesn't manufacture or sell any of the down-market NVIDIA-based boards. Given NVIDIA's role in data centers, I think the 4T market cap is, while probably still somewhat inflated by speculation, not so inflated as to be a bubble ready to pop.

The market price is supposed to account for future growth, not just for current revenue. Predicting future is speculative by definition, but it's not completely detached from reality to bet that Nvidia has the potential to grow significantly for some time (at some point either the market cap or the multiple will correct of course). I also see where the reasoning here contradicts the reality. If we assume Nvidia only sells $1000 gpus and moves a few millions a year, then how did it received $137B in FY2025? In reality they don't just sell GPUs, they sell systems for AI training and inference at insane margins (I've seen 90% estimates) and also some GPUs at decent margins (30-40%). These margins may be enough to stimulate competition at some point, but so far those risks have not materialized.

Nvidia's revenue is $44 billion in the last quarter. It's been growing at 5 billion a quarter. With a 50% profit margin. It is the most profitable company in the world; just take a look at the fiscals. If that justifies the valuation or not, your guess is as good as mine.