AI Winners, Losers and Wannabes: Valuing AI's Boost to NVIDIA's Value!

It is undeniable that AI has boosted stock prices across the board, and specifically so for companies that are core beneficiaries. I look at one of the perceived winners, NVIDIA, to estimate the AI effect on value, and whether the market price has overshot the mark. To set up the story and valuation of the company, I start by looking at both the semiconductor business over time and NVIDIA place in that business. NVIDIA has been able to post high growth in a maturing business by being in the right place at the right time - gaming, crypto and now AI, and my story/valuation of the company is built on the presumption that it will continue to be an opportunistic growth company, that deliver premium operating margins. Notwithstanding the optimistic tilt, I find the company over valued, though it is possible to map out pathways to get to a trillion dollar value.

[MalcolmHamlin]

I feel investors should focus on under-the-radar stocks, considering the current rollercoaster nature of the stock market, Because 35% of my $270k portfolio comprises plummeting stocks that were once revered. I don't know where to go here out of devastation.

[Wooster]

Thanks for posting this, Aswath. I was a student of yours in a past life, when you were at UCLA, assisting prof Litt in his financial analysis class. You’re the best teacher I ever had.

[melvipais]

Wow Ashwath, the amount of hardwork that goes into this is commendable.. thanks for your kindness.. offering it for free

[Dr.Dumpnpump]

I’ve learnt so much from you for free. I’m so grateful there’s people like you Aswath.

[MrKevinClean]

I love your honesty and your way of teaching. So pragmatic, common sense and in some times with a little touch of humor. You are one of the bests for sure!

[aqrs]

Thank you for sharing, professor. I subscribed recently to your channel. Watching and reading your back catalog of valuations is a great gift, but watching a fresh valuation on a topic which dominates the market in real-time is on another level. Thank you.

[nwgverified]

That's so funny, just yesterday I was thinking about how rosy the forecasts would have to be to justify that NVIDIA stock value. What a coincidence.

[msin]

Years of accounting and MBA courses and finally someone who explains things succinctly!!!

[pratikamin]

Its really in depth analysis... Thank you.. it's always pleasure to listen

[rajraina]

Thank you. Would be great to get a follow up post on AI winners and losers and how you are going about that research for your self. Also, wondering if in one of your next sessions you could share how you go about researching a sector you know very little about and still sound profound ( essentially what is the framework you use). Thanks as always

[herokorai]

Best teacher and always enjoy watching your videos!

[robbarnett]

Hi Professor Damodaran, it has been a few years since I completed your course so I may have forgotten some of the fundamentals. Can you please clarify your current thinking on a company's terminal ROIC. I thought that your historical rule of thumb was that very few companies could achieve terminal ROIC's above their terminal cost of capital with the exceptional companies having an ROIC no greater than 12%. Could you also clarify the Monte Carlo input for the cost of capital. I think that you are varying the input for the initial cost of capital. Would the valuation not be more sensitive to the terminal cost of capital? Many thanks & best regards, Rob.

[rocking]

3:23 Semiconductors is a growth business that is maturing if not already mature - Thanks Prof. Damodaran!

[me]

As a scientist, engineer, and academic, I'm very excited for the development of AI/ML/DL tech. I think it'll be very powerful for the development of my fields (electrochemistry, molecular physics, materials science, and chemical engineering). Molecular design, reaction design, crystal analysis, and ultimately, full systemic simulations that are physically accurate. Of course, I think the last one is a long way away, since even simple simulations are very expensive to run right now, but it seems just a little big closer now. And from a business view, I think this could rekindle a public interest to invest in scientific research.

[vaibhavKumar-ep]

the best teacher I never had until now. thank you so much for teaching people

[merzibow]

Fantastic analysis professor! Your videos on these matters never disappoint.

[theinvestorstrategist]

Hi Aswath. Why don't you do an update on your Tesla video from a few months back. The share price has surpassed or soared your valuation metrics. What now?

[ajit]

One key piece of recent spike in the earnings and revenues is that there has been a big upfront buying of nvidias products from Chinese tech giants due to the future restrictions from US regulators. Nvidia doesn't show revenues by geography but I'm sure it's pretty big more than the third of their revenue.

[ssiqcwe]

Thank you Aswath for sharing your wisdom. You are a great teacher.

[praneshumashankar]

I've been doing a lot of thinking and research on building a NVDA short thesis and this helped me with that process a lot. Thank you Professor!