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.
Slides: pages.stern.nyu.edu/~adamodar...
Valuation: pages.stern.nyu.edu/~adamodar...

[@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.

[@DonaldJones923]

@RobertSteele7623 This is considerable! think you could suggest any professionals/advisors? I'm in dire need of proper portfolio allocation.

[@DonaldJones923]

@RobertSteele7623 Appreciate this recommendation, hopefully, I can get some insight into where the market is headed and strategies to beat the downtrend when I hear back from Victoria Carmen Santaella.

[@melvipais]

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

[@Wooster77]

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.

[@blessingpaul5484]

I began my investment journey at the age of 33, primarily through hard work and dedication. I am to share that my passive income exceeded $100k in a single month for the first time. This success reinforces the importance of the advice mentioned earlier. It is not about achieving quick wealth, but rather ensuring long-term financial prosperity..

[@Jessicatorres_768]

Investors should exercise caution with their exposure and exercise caution when considering new investments, particularly during periods of inflation. It is advisable to seek guidance from a professional or trusted advisor in order to navigate this recession and achieve potential high yields.

[@SophiaBint-wj8wn]

This is superb! Information, as a noob it gets quite to handle all of this and staying informed is a major cause, how do you go about this are you a pro investor?

[@blessingpaul5484]

Through closely monitoring the performance of my portfolio, I have witnessed a remarkable growth of $500k in just the past two quarters. This experience has shed light on why experienced traders are able to generate substantial returns even in lesser-known markets. It is safe to say that this bold decision has been one of the most impactful choices I have made recently.

[@PhilSommer2]

wow that’s stirring! Do you mind connecting me to your advisor please. I desperately need one to diversified my portfolio..

[@blessingpaul5484]

My advisor is *Nolan Velden Brent* , a renowned figure in his line of work. I recommend researching his credentials further. He has many years of experience and is a valuable resource for anyone looking to navigate the financial market.

[@aqrs269]

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.

[@Dr.Dumpnpump]

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

[@MrKevinTellez]

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!

[@pratikamin8]

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

[@user-ls4nh9ez6t]

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

[@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.

[@msin148]

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

[@rajraina8291]

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

[@herokorai8346]

Best teacher and always enjoy watching your videos!

[@NathanielParedesTrades]

Thank you professor Damodoran.

[@merzibow]

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

[@e_anagnostou]

Thanks for posting Professor. As always you are doing an excellent job, not only in the valuation process but also in the educational one.

[@christiancoronado]

Simply masterful. Thank you so much!

[@robbarnett6530]

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.

[@vikaashsrivastav]

Excellent Analysis , explained with such a simplicity that anyone listening will be able to understand. Thank you Prof @Aswath Damodaran

[@user-ss2iq3cw8e]

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

[@CarlitoBriganteTR]

You have enlightened us a lot with this video. Thanks Professor.

[@AnkittK81379]

Sir please provide us complete course on financial modeling From beginning to advance. With pratical case studies. Humble request to you sir. Hare Krishna 🙏

[@heetprajapati6414]

+1

[@priyant95]

+1

[@crohmer]

Lol

[@thienfoil]

He has it on his channel every semester

[@diviyampat9996]

​@@thienfoilhe only has valuation and corporate finance courses

[@ves6613]

Superb as always!!!!! Forever grateful!!!!

[@mattk1631]

Appreciate the quality analysis as always.

[@mauricioa1744]

Great material as always. Thank you

[@rocking1313]

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

[@mbtki1047]

great analysis. They have a clear advantage, even in the cloud space where they are in every major cloud provider.

[@pauljones9150]

Always a pleasure to watch your videos

[@user-jj4sg8ci5x]

Thank you very much for sharing all this knowledge for Free, you are doing service to society

[@maxhaenni]

Great walkthrough. Thanks.

[@joao.stigliani]

Very great class!! The best explanation i ever see..

[@rkagarwal03]

Simply brilliant 👏🏽

[@karthikashok]

Excellent as always a very big fan

[@hokaconnect]

Thank you

[@Richmenscity]

Thank you for sharing knowledge which big university provide for thousands of dollars And professor Like you is giving it for free Thanks for your kindness Sending love from india ❤️

[@klevisbilani]

Great video, thanks for posting. Very insightful on valuation and on the method of analysis. However, it would be interesting to know if you did the same type of analysis in 2018 when you purchased the stock (i would assume at around 32-38$ per share) what was the projection for the price of the shares 5 years later? Maybe i am wrong, but an increase of approx. 12x seems very improbable. And if it wasn’t a close estimation to what happened in reality then how can one judge if the current price represents the intrinsic value. Because if i would assume such an increase even 300$ per share would have represented a fair price in 2018. Maybe there is a flaw in my way of thinking but i hope someone could point that out. Also would be interesting to know if you also consider inflation on the projections for revenues in the next 10 years.

[@santhankumar3709]

Hi @Aswath, why the AMD not listed in the top 10? Is there any specific reason?

[@pastplayclashofclans]

Such a good analysis..

[@ajit788]

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.

[@LaszloMag]

Biggest lesson I've learned about investing and valuation was buying NVDA. NVDA is my best performer among 25 companies in my portfolio, but the position I took years ago was was a relatively small one compared to other ones I've made, because the company a that time was "overvalued" - something the professor has been alluding to numerous times in his lectures.

[@suyashkela2382]

Which tools can be used to calculate the revenues and margins of an entire industry ? TIA

[@me0101001000]

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.

[@Danny-qt5vt]

hello, do you want to explain further? Do you believe that AI will enable scientists to conduct full systemic simulations? Wouldn't that presume perfect knowlegde of all confluing variables in a given system?

[@me0101001000]

@@Danny-qt5vt You asked two questions. Let me answer the two separately. 1: Yes, eventually. At the very least, create a reliable model as to how a system will operate. It doesn't have to be perfectly accurate to ever scenario, but merely describe the behavior of an average system given the information provided. 2: Not necessarily. There is always space allowed for unknowns, which are usually described in a Gaussian manner. The MO for most systems is by paying your DUES (Diagrams, Unknowns, Equations, Solutions). The name of the game here is creating a more comprehensive bill of unknowns, consolidating dependencies in the unknowns, writing a more complete equations.

[@LPDhub]

@@me0101001000thanks for your response. Can you elaborate on DUES, specifically unknowns? 🙏

[@Danny-qt5vt]

@@me0101001000 okay, interesting viewpoints! Could you direct me to sources for further exploration on these topics?

[@jithendravs]

Thank you so much!

[@RajSharma-ec7mn]

Sir, what's difference under graduate and mba spring valuation series?

[@EricaBMarcus]

Hi Prof, in your view, what will dampen NVIDIA stock price momentum (if anything)? At the moment, it just is on a tear and I am just sitting, waiting, wishing....to find an entry point.

[@JoshuaStorm-zi1wy]

Great video!

[@avijitpaul9015]

Sir, happy Guru Purnima to you. You are my only and forever the one Guru.

[@UCLu80m2ixrOHYgI6ioFZFhA]

As prof.Damoraran mentioned during lecture, valuation and pricing is completely different thing

[@viktorio998]

Dear professor Aswath, could you please explain where/how do you consider Capex and WC under the DCF? Are they considered in the in the row "Reinvestment" through the Sales/Capital ratio? If so, I would be very grateful if you could elaborate more on that? Thank you very much for your work and for your time. Kind regards, Viktor

[@RedditMan]

In terms of 4b. End users, it may have been nice if you also added if the total number of uses for the semiconductors as it most likely increased (the pie chart only depicts the percentage rather than the total number of semiconductors being used)

[@luismvsilva]

Amazing as always

[@praneshumashankar8319]

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!

[@jia7833]

You don’t short a company just because it’s over valued. It’s a promising business that markets is a little bit ahead of itself but doesn’t mean the holders want to get rid of it.

[@monsterboomer8051]

@@jia7833 Nvidia is not overvalued. It is BRUTALLY ENOURMOUSLY overvalued.

[@jia7833]

@@monsterboomer8051 guess what, good companies are overvalued for most of the time, and great companies are even more.

[@zaferatakan1082]

YOU ARE AN AMAZING GUY! I never had the opportunity to meet in person though I watched many of your videos, and your sound started grow like Anthony Hopkins, so fatherly, almost heavenly. God bless you!

[@missunique65]

fabulous!!!!

[@chrisreiche]

How do you factor in the risk of TSMC going down due to geopolitics? Without TSMC there are no chips for NVDA. What about taking the risk from TSMC and apply it to NVDA, since it is fundamental there?

[@honglu679]

Tsmc is not the only fab, it is the best/biggest one right now, but others are not too far off either. Given the right opportunity, others could catch up, say, for geopolitical reason, tsmc is down or not available. Other fabs will get enough resources and money to fill in the void. All the fabless design houses might suffer for a while, but it would not be the doom day, hopefully.

[@chrisreiche]

@@honglu679 for now TSMC is the only one capable to produce the chips for NVDA. Even if other could catch up, it still is an issue of scale. And the time others catch up to the current state of the art, TSMC might be well ahead again.

[@monsterboomer8051]

@@honglu679 You are horribly wrong. TSMC is crucial. Others can't get anywhere near. You naive idea, that pouring money into fabs is enough is wrong. It is not about money, it is about know-how and ability to yield top chips. Just look at Intel how much capex they unloaded to fabs and they still can't get pasat 7nm. If Taiwan is invaded, it means 2-3 years halt on advanced chips production worldwide.

[@newdata]

china mentality is all about progress. AI is progress. They will never stop tsmc or nvda.

[@nagpalsid]

Thank you Prof, excellent video. If I may, you didn’t add much of political risk on the AI story. You did mention the senators aren’t capable of understanding AI hence you don’t trust their ability to block it, but what if you’re wrong and there is a strong political will to slow down AI. What happens to nvidia then? Your estimates all come with a bottom 10-20% range, would political risk take us there? Any further inputs?

[@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?

[@estring123]

nice video aswath

[@LalitPrakashVatsal]

Regarding the gaming and crypto dominance of nvidia, even if they look like opportunistic moves, they both are related and well timed. After establishing itself for its gaming hardware (high data-parallel processors), they even enabled developers to utilize then (mostly focussed towards game developers) with their CUDA platform as early as late 2000s. When crypto mining boomed, this was the right “matured” product at the right time! And these machines considered to be bulky and and can be placed in a desktop, bulky gaming laptop or server farms, but brings the AI capability to client-side, or to simply put, in the smartphones (mobile computing) is a different ballgame where Qualcomm, Samsung and Apple reign supreme.

[@josecarlosazor3337]

could you do or do you have an Intel valuation?

[@Martinit0]

I love how the historic graphs for NVIDIA go way back to the IPO. Too many analysis are focused only on most recent years.

[@AlexMercer-jp7bv]

I was wondering about NVIDIA's debt Outlook. Not what they borrowed but the one's receivable by them. In this ongoing AI Boom many are rushing towards entering thre business and Nvidia having the largest market share must be the prominent supplier for the same. As said in the video itself, when everyone is in the pool, instead of benefiting it would rather become destructive. So when/if businesses fail ( a large chunk of them ) possibly, what will be the debt recoverable Outlook for Nvidia in upcoming periods?

[@dhruvshah2719]

God level analysis

[@Mrhiest292]

Sir please make videos on Indian companies it would be easier for us Indians to understand . Thank you

[@polomarkos]

Semiconductor where always a vital component of technology. They just gain so much reputation today because of AI and because of their shortage during pandemic

[@mindcache5650]

Just what I thought. When stocks collapsed earlier this year in January and February, NVIDIA was my primary target to buy on my my radar. Their move into digital twin factories for Siemens, BMW and their build of the Superaccelation Computer with 1 trillion transistors and layered petaflops is amazing. I didn’t buy because………….it’s PE is 235 . Google’s is 11.

[@rfs589]

been picking apart the valuation spreadsheet, does anyone know how he came to $4,496m operating income TTM? his R&D adjustment doesn't add up to me.

[@Victorius-Investimentos]

good!

[@kk22001]

1k usd per share. There is a reason he is a professor at NYU not running a multi billion hedge fund. To all his students, take note!

[@yinghe9943]

The numbers are far more underestimated.

[@maltlickytexas]

NVIDIA🚀🙏🙏🙏

[@manubhatt3]

If we will have more robots and more EVs in future, then may be the semiconductor business will remain in growth mode rather than it being a blip?

[@me0101001000]

Depends on how the tech develops. If we cling to the current material paradigm, i.e. silicon and gallium arsenide, we're going to get stuck. The development of nanomaterials for semiconductors. This means graphene, boron nitride, titanium trisulfide, and molybdenum sulfide above all others. All of these are 2D materials which have the ability to be scaffolded nicely to create heterostructures, cramming in more processors per unit volume. If you are okay with a bit of tech jargon, I recommend checking out Asianometry. He goes over the frontiers of semiconductor technology quite well. He doesn't get too technical, but just enough to give you an appreciation of what has been done and what the steps forward are.

[@siddheshkadam2728]

I don't know if you reply to comments or not but this question is regarding 4b. End user 2030E, with increasing rise in home automation and other IoT devices, dont you think gadgets will have much more share, and if the new launch of apple Mixed reality device gets a phenomenal response 3-4 years down the line, will the landscape change entirely ??? Learned from you that there would be lots of Ifs and Buts, but the way I see here in India, lot of people are buying alexa device and remote control lights and fans are being purchased.

[@tarunyadav9723]

Tbh the estimations seem fairly plausible to me keeping in the mind the almost certain future surge in the electronic automative & the AI industry. As far as Indian market is considered, at the moment it doesn't hold much of a significance in this semiconductor space as India is neither a major consumer nor a major manufacturer in the domain, even though the Indian government has kicked-off the process to be a major player, they are more likely to draw the results in the long-run only. Thus, in my opinion America in the short-run is the major player in the semiconductor space as it is moving manufacturing plants from Taiwan to US quiet aggresively and on the consumer side it has always held significant relevance. So all in all, the user segment would largely be determined by their needs only, which is indicated by that pie chart. Although, the apple point you mentioned still holds relevance, but unless something unprecedented happens I dont' think so it will create that big of a disruption atleast in the short-term.

[@mrretired2715]

Is there any company he values that are under valued

[@Tential1]

39:30 if you're a pure value investor. I stick with managers I like. Jensen has delivered 20+ years. I couldn't bet against him. Same with Jeff Bezos and Elon musk. Sometimes, you see a person and you know, they're special. Jensen fits that for me. And I find, he outperforms whatever I think. So I understand the numbers, they make sense, but, I believe Jensen can hit unknowns. I don't believe you should apply this thinking to everyone. Ford? GM? Normal. Companies, no. When a company proves it's special, I find that letting that play out is more beneficial. At least for Amazon, Tesla and Nvidia lol.

[@MrBizaaro]

Its close to 500 now.

[@alwanexus]

My question is who is going to fab all these chips for this growth? I don't think ASML is building 50% more machines annually, and TSMC isn't adding 50% more capacity annually. From a supply perspective, this just doesn't seem grounded in reality. Not to mention where's all the electricity to power all this going to come from? Obviously no one knows about demand side, but big picture is will companies keep improving their bottom lines after spending $200 billion a year on NVDA hardware (not to mention the SW, the engineers, and the power)? The only reason to spend the money is to get at least that much back, either by making more (either more business or charging more) or spending less (in added efficiencies and improvements, people they don't need anymore, etc). Economy doesn't just grow proportional to investment in AI. Once it matures, it's just going to be a lot of replacement/maintenance.

[@antball775]

Love the analysis not a fan of all the numbers and charts but your take that it’s better to be in the right place and lucky then 😢smart is great imo Nvidia has one big elephant in the room they don’t actually make the chips the other is gaming and they mainly just do PC gaming and making games is very expensive now and especially going the PC route is extremely expensive so these or the things I’m looking at if they can work around it I think short term it’s great going forward not so sure

[@simond633]

Should we be shorting Nvidia then - the mkt is cyclical and so are they, so gloomy days at some point are likely?

[@vikyp989]

The wiseness of this man never ceases to amaze me. He quickly inculcated his lessons learnt from his experience with Tesla. A Classic example of ageing like fine wine unlike other academicians who become rigid and ultimately bitter with age. A truly passionate student devoted to his craft and ever evolving. A real master is always a student at his core. Thank you Guruji🙏🙏❤❤

[@matteomannocci]

Could you please value Palantir ?

[@atangbingana283]

Can you do $PLTR or give us thoughts ?

[@newdata]

think that 500 b in revenue , can bring forward to next year.

[@deucevault7850]

how has this guy built such a reputation without people knowing his historical returns, net worth, or portfolio? or is he just a teacher and people look to him for well-presented lessons but not mastery?

[@siddharthpaturu6929]

Can you please do valuation for Astral pipes? Currently, I feel they are over valued. But they are entering different business, will the price be justified for future growth?

[@sakdab]

I love the way you combine your story and the numbers. You might be a numbers person, but your story is based on history so maybe you are actually a historian.

[@namanpatel6446]

Hello Sir, I do not understand why are you suggesting to adjust the R&D expense while considering Margins. Isn't R&D a necessity for Tech companies to stay relevant.

[@joedirnfeld]

How good was your analysis on tesla.

[@JensN113]

Spot on I'd say, his assumptions were even slightly too optimistic. Stock prices are unpredictable anyways

[@joedirnfeld]

No way, they were way off , because the methodology relies in determining future cash glows and that requires an understanding of tesla beyond past performance.

[@JensN113]

It's a mediocre car company

[@joedirnfeld]

@@JensN113 so ignorant Read study learn educate yourself

[@joedirnfeld]

@@JensN113 so ignorant Read study learn educate yourself

[@mattgargiulo3995]

Looking for an update here :) closing in on $875.

[@jrossi91]

this screams bubble to me starting at 6:00

[@Do_Anything_you_want]

3:20 margins and what they tell

[@tomo9224]

The big threat to NVDA in AI is Google. They have a better AI than what ChatGPT is and they have developed their own chips (tensor processing unit). NVDA is a great company but Google develop the software and hardware so I think they are uniquely placed to take advantage of AI at a greater rate than NVDA.

[@moorecable]

When Bidu and other Chinese companies perfect AI of course Nvida is over valued. But " There is no Alternative ". So. When the hedge funds buying the hottest stocks and Nvida will be the top of those hot stocks. So buy the hype and sell the fundamentals as its so a thing of the past. No stock trades on fundemental anaylysis now. So the value is in hype with a an eye on the cost average. If you buy a boat load of stock at a good price point simpy speculate using fundamentals.

[@letstrade4827]

He’s my new college professor.

[@Blancositas]

maybe next pandemic will create a catalyst for next good entry on this stock.

[@JerryZhangz]

I think NVDA is more like Apple. It integrates software with hardware.

[@chrisf1600]

I bought 2024 put options on NVDA because the stock is absurdly overpriced. I'm fairly sure that the market will come to its senses before too long

[@mskoki5712]

How d8d it work out...

[@chrisf1600]

@@mskoki5712 haha, bad...but i've still got 3 months to expiry. Not the end of the world if I lose my premium, it was always a long shot

[@happyfinance1806]

You really fucked up mate...hope you recover from something else ..​@@chrisf1600 Best wishes

[@Violacity]

volume is pretty low

[@Tential1]

24:00 great for. Investors bad for humanity.

[@Tential1]

27:10 nvidia's years of 15-30% 5 year net income cagrs are due to excellence. I've rooted against Nvidia for 20 years hoping someone would dethrone them and we'd get cheaper products. Nah... Now I buy the stock and let Nvidia pay for Nvidia products. Nvidia has doubled net income in 2-4 years multiple times off of video games. Doing it off of ai is a cake walk in comparison.

[@Martinit0]

Same here. Always hoped AMD would rise to the challenge - they did, but not fully and still lacking on the software side.