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Summary of Aswath Damodaran's Nvidia narrative and valuation. Damodaran is notoriously conservative and previously sold half his stake in Nvidia.

Catalysts:

Nvidia's AI chips remain the central growth driver.
Continued demand in auto chips presents potential, though small.
Growth in gaming and crypto chips, though less impactful.
Nvidia's lead in AI architecture supports rapid market expansion.

Assumptions:

Revenue growth will decelerate but remain robust due to AI scaling.
Margins may compress slightly due to competition but stay strong.
Earnings could see slower growth as scaling pressures increase.

Risks:

AI growth may plateau, challenging high expectations.
Increasing competition and regulation in AI and chip markets could erode profitability.
Dependent on TSMC and exposed to China risks

Valuation

Damodaran uses a discounted cash flow to arrive at a fair value of $87. I've used the same inputs from his model for Revenue and Earnings which means a future PE multiple of 18.4x in 10 years with a discount rate of 8.49%.

Revenue: $422 billion in 10 years

Gaming/Other: $92bn
AI: $300bn (60% market share of a $500bn market in 10 years)
Auto: $30b

Total: $422bn

Gross Margins

70-75% in 2024 Q2
65% in 2034 due to rising costs from TSMC

Operating Margins

61.9% operating margin, 67.0% adjusted margin in 2024 Q2
Projected to fall to 60% by 2034

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Disclaimer

ChadWisperer is an employee of Simply Wall St, but has written this narrative in their capacity as an individual investor. ChadWisperer has a position in NasdaqGS:NVDA. Simply Wall St has no position in any companies mentioned. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimate's are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.