Cisco at its peak in 1999 had a P/E ratio of near 200. Nvidia trailing 12 months is closer to 50. ( Today it is closer to 60 ). So I dont think Cisco is a good comparison.
How much revenue can nvidia realistically have 5 years from now, and at what margins? 100bn in revenue (NVIDIA grossed 25bn last year, so 4x top line growth) at 35% gross margins = 35bn. Slap a 25x multiple on that and you have a 900bn market cap. Discounted at 8% to today that's .65 * 900bn is 600bn. Not 2000bn. Are my numbers too pessimistic? Probably.
But still, it's hard to come up with 2029 numbers that justify a 2000bn market cap today. Even with a 5% discount rate NVDA has to be worth 3000bn 5 years from now, for current investors to get a 0% return.
I think you are off by a year because NVDA’s fiscal year is 1 year ahead. NVDA’s fiscal 2024 just ended (ended Dec 2023) and was announced this week.
Their latest quarter (ended Dec 2023, fiscal Q4 2024) had 22.1bn in revenue. That’s more revenue than Cisco’s full year in 2000.
Nvidia’s fiscal 2024 just ended (ended Jan 2024) and was reported this week.
They are currently in Q1 2025.
Q4 revenue was $22B, and guiding $24B for Q1, so likely $110Bish revenue in 2024.
Their net income should be in the same ballpark as Microsoft / Apple / Amazon / Google in 2024.
Meanwhile, Apple / Amazon / Google are growing ~10% YoY, at Nvidia's current growth rate they could surpass Mag7 net income in 2025/2026.
For nvidia to have 100bn in net income they would need at at least 200bn in revenue. Apple has 100bn in net income on 400bn in revenue, for comparison.
Ultimately the question is whether nvidia's moat (chips + cuda) will be durable. My guess is competitors will arrive soon and that nvidia's margins will go down. Right now nvidia seems untouchable, but reality will set in sometime next year.
- total market size will go up - Nvidia's market share will go down - Nvidia's profit margin will go down
The trillion dollar question then is whether the uplift from #1 is bigger than the downdraft from #2 and #3.
https://www.cisco.com/c/dam/en_us/about/ac49/ac20/downloads/...
That’s a P/S of 29 (but one quarter in there is forward looking)
NVDA’s year ended Dec 2023 saw $61bn revenue. All 4 of quarters in there are backwards looking. If you shave off the oldest one (7.2bn) and add on this current quarter (22bn forecasted), you get 75.8bn.
Or a P/S of 26.4.
It’s closeish
The Company that Broke Canada - BobbyBroccoli https://www.youtube.com/watch?v=I6xwMIUPHss
I've predicted already the AI hype train will crash into the wall of reality in more or less the same way the crypto one did, and then the grifters will move on to the next thing they can over-hype.
But their marketing reports know EXACTLY what to do. Just add a blurb in any press release about "AI enabled x, y, z for our a, b, and c product lines" and the board and other execs are happy.
Meanwhile 9 times out of 10 any feature that gets rolled out will be a collection of shell scripts that simply analyzes some data and spits out an answer, any answer, and "we AI enabled."
First off, 3D games existed before NVIDIA. NVIDIA wasn't even first to market for making dedicated 3D acceleration hardware.
CUDA existed before Bitcoin and was used for physics and chemistry simulations when it first came out.
> "Compute that does nothing important"
Entertainment is important, so to just toss 3D games aside is asinine. I'll agree that crypto-mining is completely worthless. As far AI, certainly there's a lot of hype around it right now, and we're probably gonna see a lot of AI startups go belly-up in the next couple years, but it's definitely not a fad and isn't going away.
Being highly dismissive doesn't make you cool or edgy, just so you know.
Beyond that, there was no crystal ball, rather a useful physical product and software tools to make it accessible beyond a highly specialized set of users (I am not saying CUDA or anything is that accessible, but it makes GPU's useful to more than just game devs).
Transformers and diffusion models have already completely changed the game and the architectures are still very primitive. They will only get better from here.
The crazy part is that for the foreseeable future, the limiting factor for improvement is compute. Train the models for more epochs is all that is needed, for now. Moores law seems to be coming back for another round.
Anyone who's worked in tech for a few decades knows that what the OP describes happens regularly.
There's nothing patronizing about sensing the pattern forming again here, and recognizing that the only sure thing is that the doe-eyed forty-niners racing to California all need pick axes and camp supplies and that the axemaker is going to get rich on their dreams no matter how things turn out.
It doesn't suggest that there's no gold out that or that the game theory calculus that sends everybody chasing that gold is unsound. No individual is being called stupid.
It just emphasises that a lot of people are going to make the wrong bets on AI, using more money than they really could afford to lose, and that NVidia is the only guaranteed (absurd) winner so far. There's nothing patronizing or even contentious to that.
I have no doubt that society will benefit from all that spending...
but I'm much less certain about the fate of all the companies incurring all that spending!
What I said is that they're spending money, for a variety of AI and AI-related services provided by third parties.
Those third parties, in turn, are buying GPU's.
What's not clear is if they'll get 20% better or 500% better.
How did it go with bitcoin and cryptocurrency in general? That seems the apt comparison.
There's so much money being thrown at anything with "AI" in it at this point - definitely FOMO fever. While I think Nvidia will do just fine (as the primary maker of picks in a gold rush) it seems like they're going to need to go after yet other markets - the trajectory so far has been gaming -> crypto -> AI. What's coming after that?
It is not going to be a differentiator.
Every worker will need to be equipped with an AI assistant or the company is pedalling a bike on the freeway.
AI is a tool, like a laptop. Does having a laptop make you special? Nope. But you MUST have it.
Every provider of "AI as a Service" is spending money like a drunken sailor who just came back after spending six months at sea. None of these providers are charging enough to cover the cost of development, training, or even inference. There's a lot of FOMO: no tech company wants to be left out of the party.
Nvidia, as the dominant software-plus-hardware platform (CUDA is a huge deal), is the main beneficiary of all this FOMO. A lot of unprofitable spending in AI ends up becoming... a juicy profit for Nvidia. We're witnessing large-scale transfer of wealth, from the FOMO crowd and clueless end-users to mainly one company.
The $2T question is: Is all this FOMO sustainable in the long run?