NVIDIA: Still a Lottery Ticket
NVIDIA Corporation (NVDA)
Current Price: $167.03
Business Overview
NVIDIA leads the GPU market and is central to AI infrastructure. Its revenue is split across:
Data Center (~60%) – powering AI workloads, LLM training (H100, B100 GPUs)
Gaming (~17%) – RTX GPUs for gaming and cloud streaming
Professional Visualization (~2%) – CAD and 3D rendering
Automotive (~1%) – NVIDIA DRIVE platform
CUDA’s entrenched developer ecosystem locks in enterprise use.
Investment Thesis
AI Infrastructure Dominance – Controls over 80% of AI GPU market; key for cloud and AI-native firms.
Ecosystem Lock-In – CUDA remains the de facto standard, making switching costly.
Margin Expansion – High-margin product pricing (H100 at $25k–$40k), growing software revenue.
Catalysts
Launch of B100 in early 2025
Sustained AI CapEx from hyperscalers (~$200 billion projected in 2025)
H20 chip for China to navigate export restrictions
Boost in software revenue from AI Enterprise tools and inference APIs
Risks
Rich valuation (~40× forward P/E) with minimal margin for error
CoWoS packaging constraints could limit supply
U.S.–China export controls threaten Asian sales
Competition from AMD MI300X, Google TPUs, and Amazon chips
Valuation Snapshot
Forward P/E: ~40× (based on ~$4.18 EPS)
EV/EBITDA: ~32×
DCF Fair Value: $180 (assumes 20% revenue CAGR, 30% FCF margin, 9% WACC)
Peer P/E: AMD ~35×, Broadcom ~26×, Supermicro ~21×
Conclusion
NVIDIA remains the primary beneficiary of the global AI expansion, with unmatched margins, pricing power, and ecosystem advantages. Despite valuation risks, its competitive edge supports a buy recommendation.
Recommendation: Buy
Target Price: $180
Time Horizon: 12–18 months
