Is Nvidia (Still) Overvalued?
Summary
TLDRNvidia's shares surged to a record high, making it the world's most valuable company, surpassing Apple and Microsoft. The company's focus on GPUs, initially for gaming, expanded to cryptocurrency mining and AI, driving its stock price up 1,000% since 2020. Despite concerns over market reliance on a single firm, Nvidia's dominance in the AI chip market and potential geopolitical impacts suggest a future of continued growth or challenges, depending on AI's trajectory and global politics.
Takeaways
- 📈 Nvidia's shares climbed 3.5%, reaching a market capitalization of $3.34 trillion, making it the world's most valuable company, surpassing both Apple and Microsoft.
- 🏆 The last time a company on the S&P 500 was worth more than Apple or Microsoft was in 2011 with Exxon Mobil.
- 🚀 Nvidia's stock has seen an astronomical rise, with a 40% increase in the last month, 200% in the last year, and nearly 1,000% since 2020.
- 💰 Nvidia's success has contributed significantly to the S&P 500 and NASDAQ gains, with its stock being responsible for nearly a third of all gains on the S&P 500 and 40% on the NASDAQ index this year.
- 💡 Nvidia's CEO, Jensen Huang, has become a celebrity in the tech and meme stock world, reflecting the company's impact and popularity.
- 🛑 Despite Nvidia's stock being rated as a 'buy' by most analysts, its rapid rise and the market's reliance on a single company have caused anxiety among investors.
- 💼 Nvidia was founded in 1993 and went public in 1999, initially focusing on designing Graphics Processing Units (GPUs) for video games.
- 🔄 The company found new demand for its GPUs in the late 2010s with the rise of cryptocurrency mining, which also made it vulnerable to market volatility.
- 🧠 Nvidia's fortunes were transformed by the release of AI technologies like Chat GPT, as GPUs are essential for running and training AI models.
- 📊 Nvidia's revenues and profits have skyrocketed, with a 262% increase in revenues and 600% increase in profits year on year according to their latest results.
- 🌐 Nvidia's dominance in the high-end AI chip market, with approximately 95% market share, is attributed to its superior chips, networking, and industry-standard software framework, CUDA.
- 🔍 The future of Nvidia depends on the success of AI, geopolitical factors, particularly American sanctions affecting sales in East Asia, and its ability to maintain its near-monopolistic position in the chip market.
Q & A
Why did Nvidia's shares climb by 3.5% on Tuesday?
-Nvidia's shares climbed by 3.5%, taking its market capitalization to a record high of $3.34 trillion, making it the world's most valuable company, surpassing Apple and Microsoft.
What was the last time a company listed on the S&P 500 was worth more than Apple or Microsoft?
-The last time a company listed on the S&P 500 was worth more than Apple or Microsoft was AT&T Wireless back in 2011.
How much has Nvidia's stock risen in the last month, year, and since 2022 according to the video?
-Nvidia's stock has risen by 40% in the last month, 200% in the last year, and nearly 1,000% since 2022.
What is Nvidia's contribution to the gains on the S&P 500 and NASDAQ index this year?
-Nvidia has been responsible for nearly a third of all gains on the S&P 500 and 40% of all gains on the tech-based NASDAQ index this year.
What is Nvidia's CEO Jensen Huang's status in the tech and stock world?
-Jensen Huang has become a sort of celebrity in both the tech and stock world, enjoying rockstar treatment at tech expos.
What is Nvidia's business model regarding the manufacturing of its chips?
-Nvidia is a fabless company, meaning it designs its chips but outsources the manufacturing to others, usually Taiwan Semiconductor Manufacturing Company.
Why were Nvidia's GPUs initially popular in the gaming industry?
-Nvidia's GPUs were initially popular in gaming because they are designed to perform thousands of simple tasks simultaneously, making them well-suited for graphics processing.
How did the cryptocurrency market impact Nvidia's business?
-The cryptocurrency market created a new demand for Nvidia's GPUs because they were uniquely well-suited to crypto mining, although this also made the business vulnerable to crypto-related volatility.
What event in the tech industry significantly boosted Nvidia's fortunes?
-The release of Chat GPT and the subsequent AI boom significantly boosted Nvidia's fortunes, as GPUs became useful for running and training AI models.
What is the potential risk to Nvidia's sales in East Asia due to geopolitics?
-American sanctions could affect Nvidia's sales in East Asia, particularly China, which previously accounted for about 25% of revenue. However, Nvidia has mitigated this by creating chips under the sanctions threshold and rerouting sales via Singapore.
What is Nvidia's strategy to maintain its near-monopolistic position in the chip market?
-Nvidia maintains its position by providing the best chips, the best networking kit, and the best software, with Cuda becoming the industry standard. This creates a monopolistic moat that insulates it from competitors.
Outlines
📈 Nvidia's Record-Breaking Market Capitalization
Nvidia's shares surged by 3.5%, propelling its market capitalization to an unprecedented high of $3.34 trillion, surpassing Apple and Microsoft to become the world's most valuable company. This achievement is particularly remarkable given that the last time a company on the S&P 500 outperformed these tech giants was in 2011 with X on mobile. Nvidia's stock has seen a remarkable rise, with a 40% increase in the last month, 200% in the last year, and a staggering 1,000% since 2020. The company's success has been a major driver of the S&P 500 and NASDAQ gains, with its CEO, Jensen Huang, enjoying celebrity status in the tech and stock market worlds. Despite the bullish outlook, concerns about the market's reliance on a single company have sparked investor anxiety. The video aims to explore how Nvidia reached this pinnacle and the sustainability of its growth, starting with its foundation in 1993 and its transition from a GPU designer for gaming to a key player in the cryptocurrency mining and AI booms.
🌐 Nvidia's Future: AI, Geopolitics, and Market Dominance
The future of Nvidia hinges on the potential of AI and the company's ability to capitalize on it. The video discusses the importance of geopolitics, particularly American sanctions, which have impacted Nvidia's sales in China but have been mitigated by strategic adjustments. The possibility of U.S. support due to Nvidia's strategic value in the tech war with China could be a boon for the company. Nvidia's near-monopoly in the high-end AI chip market, with approximately 95% market share, is attributed to its superior products and the ecosystem it provides, including the industry-standard Cuda framework. While competitors like AMD are attempting to break into the market, Nvidia's comprehensive offerings in chips, networking, and software have created a strong competitive barrier. The video also mentions the potential risks of overvaluation and the historical precedent of companies falling from monopolistic heights due to increased competition. Lastly, the script transitions to a personal anecdote about using Skillshare to learn magazine design, highlighting the platform's value in career development and the availability of a free trial for the first 500 users.
Mindmap
Keywords
💡Skillshare
💡Nvidia
💡Market Capitalization
💡AI Boom
💡GPUs (Graphics Processing Units)
💡S&P 500
💡Cryptocurrency Mining
💡NASDAQ
💡Overvalued
💡Monopoly
💡Geopolitics
Highlights
Nvidia shares climbed by 3.5%, reaching a market capitalization of $3.34 trillion and becoming the world's most valuable company.
Nvidia overtook Apple and Microsoft, who have been competing for the top spot for over a decade.
The last company to surpass Apple or Microsoft in value was X on Mobile in 2011.
Nvidia's stock has risen by 40% in the last month, 200% in the last year, and nearly 1,000% since 2020.
Nvidia's rise accounted for nearly a third of all gains on the S&P 500 and 40% of gains on the NASDAQ index in the current year.
Nvidia's CEO, Jensen Huang, has become a celebrity in both the tech and meme stock world.
Most analysts still rate Nvidia's stock as a buy despite its rapid rise.
Nvidia's success has raised concerns about the stock market's reliance on a single company.
Nvidia was founded in 1993 and initially focused on designing GPUs for video games.
Nvidia found new demand for its GPUs in cryptocurrency mining in the late 2010s.
The release of Chat GPT and the AI boom significantly increased demand for Nvidia's GPUs.
Nvidia's revenues are up 262% year on year, and profits are up 600% according to Q1 results.
Nvidia revealed its new NextGen Blackwell chips, which are expected to be twice as powerful for AI model training.
Demand for Nvidia's new Blackwell chips is outstripping supply.
Nvidia's future depends on the success of AI and its ability to maintain a dominant position in the GPU market.
American sanctions have impacted Nvidia's sales in China but the company has found ways to mitigate the effects.
Nvidia's potential strategic significance in the US-China tech war could lead to government support.
Nvidia's near-monopolistic position in the chip market is due to its high-quality chips, networking, and industry-standard software framework, CUDA.
Nvidia's future is also dependent on maintaining its monopolistic hold in the face of competition.
The video creator used Skillshare to learn design for a physical magazine project.
Skillshare offers thousands of classes across various fields and can help advance careers or side hustles.
The first 500 people to use a provided link will receive a one-month free trial of Skillshare.
Transcripts
this video was brought to you by
skillshare on Tuesday Nvidia shares
climbed by
3.5% taking its market capitalization to
a record high of $ 3.34 trillion and
officially making it the world's most
valuable company Le frogging both apple
and Microsoft who've been buying for the
top spot for more than a decade for
context the last time that any company
listed on the S&P 500 was worth more
than either apple or Microsoft was X on
mobile back in 2011 11 and Nvidia is
just the 12th company ever to lead the
index since its Inception in
1926 this marks a climax of a frankly
astronomical rise for NVIDIA which has
now seen its stock rise by 40% in the
last month 200% in the last year and by
nearly 1,000% since 2022 nvidia's rise
means that it's been solely responsible
for nearly a third of all gains on the
S&P 500 this year and 40% of all gains
on the tech-based NASDAQ index nvidia's
CEO Jensen hang has duly become a sort
of celebrity in both the tech and mem
stock World enjoying Rockstar treatment
at Tech Expos nonetheless even though
the vast majority of analysts still rate
nvidia's stock as a buy its vtiger rise
and the stock market's wider Reliance on
a single company has provoked some
understandable anxiety among investors
so in this video we're going to take a
look at how Nvidia became the world's
most valuable company and whether this
boom can really
last so let's start with a bit of
context about Nvidia itself Nvidia was
founded by hang and two other guys in
California in 1993 and went public in
1999 for most of its first 20 years or
so Nvidia focused on designing Graphics
processing units or gpus now Nvidia is
what's known as a Fab company so it
doesn't actually manufacture its chips
it just designs them and then outsources
the manufacturing to someone else
usually the Taiwan semiconductor
Manufacturing Company until relatively
recently these gpus were mostly used in
video games this is mainly because in
simple terms gpus are specifically
designed to perform thousands of simple
tasks at the same time which means that
they're well suited to Graphics
processing where textures lighting and
the rendering of shapes all has to be
done at once then in the late 2010s
Nvidia found a new demand for its chips
with cryptocurrencies because gpus were
also uniquely well suited to crypto
mining this was obviously great news for
NVIDIA but it made the business
vulnerable to crypto related volatility
which is why nvidia's stock tanked in
summer 2022 fortunately for NVIDIA
though only a few months after its
crypto related dip the company's
fortunes were transformed by the release
of chat GPT and the subsequent AI boom
and this is because gpus are also useful
for both running AI models and perhaps
more significantly training the models
in the first place which involves tons
of repetitive smaller tasks anyway the
AI boom we've seen over the last 18
months or so has Julie created a massive
demand for nvidia's gpus and revenues
have beaten expectations at every
earnings course since according to the
most recent results from the first
quarter of this year nvidia's revenues
are up 262 % year on year and its
profits are up 600% on top of that
analysts are bullish about future
revenues in March Nvidia revealed its
new NextGen Blackwell chips which one
claims will be twice as powerful for
training AI models as the current
generation of Hopper chips which were
only released last year and hang also
said that demand for these new Blackwell
chips was already way out stripping
Supply and preemptively promised another
new chip next year the combination of
eyering profits and bullish projections
have fueled nvidia's meteoric rise but
while nvidia's boom is sort of
understandable given the hype around Ai
and nvidia's dominant position in the
GPU Market the fact that they've gone
from essentially a second tier
semiconductor firm known for giving Call
of Duty better resolution to the most
valuable company in just 5 years has got
many investors asking is NVIDIA
overvalued well the first thing we need
to say is that this is is not investment
advice and more generally don't take
investment advice from YouTubers but
well even if you were looking for
investment advice this video wouldn't be
very helpful because the best answer we
can give to the question is NVIDIA
overvalued is it depends for starters it
depends on whether or not AI generally
ends up being all it's cracked up to be
we've already done a video on this so go
and check that out if you want to know
more but obviously nvidia's prospects
depend on not just whether AI ends up
being the Revolutionary technology that
advocates claim it will be but also
whether the companies buying Nvidia
chips are actually able to use AI to
capture value secondly it depends a
surprising amount on geopolitics the
main risk here is how American sanctions
might affect nvidia's sales in East Asia
American sanctions have already crippled
nvidia's sales in China which previously
accounted for about 25% of Revenue but
Nvidia has been able to mitigate this
damage by creating chips that fall just
under the American sanctions threshold
and re-rooting sales via Singapore which
now accounts for about 15% of all sales
however if American sanctions were to
escalate this would become significantly
more difficult on the flip side however
if the US decides that Nvidia is
strategically significant in its
escalating Tech war with China it might
end up receiving direct or indirect
support from us or other Western
governments becoming the West's deao arm
supplier for World War GPT would be an
immensely lucrative business for NVIDIA
because unlike its current customers
governments have basically zero in-house
engineering knowhow which means that
they'd have to not just buy Nvidia chips
but its entire infrastructure the US has
already signaled its willingness to
support domestic chip making via the
aptly named chips act which earmarks
some 50 billion dollars in subsidies for
american-based firms and even if it
doesn't actively support Nvidia its
strategic value might protect Nvidia
from antitrust regulations but perhaps
the main thing that nvidia's future
depends on is whether it can main its
near monopolistic position on the chips
Market nvidia's ridiculous profit
margins are a consequence of the fact
that it accounts for something like 95%
of all high-end AI chips now this is in
part because nvidia's chips are just
good but it's mainly because envidia
also provides the infrastructure that
surrounds the chips for stars Nvidia Now
controls something like 80% of the chip
networking Market but perhaps more
importantly Cuda which is the framework
Nidia uses to write software that makes
best advantage of its chips has become
the industry standard and it's not
compatible with other chips by providing
the best chips the best networking kit
and the best software Nvidia has
developed a sort of monopolistic Mo that
insulates it from competitors because
any serious Contender will need to beat
it on all three now despite efforts from
Big tech companies and direct
competitors like AMD to provide
Alternatives at the moment nvidia's grip
on the market looks relatively secure
and that's reflected through its stock
price nonetheless corporate history is
replete with instances of pioneering
companies that start off with a
well-defined monopoly get used to
charging monopolistic rates and then
come crashing down when competition
kicks in a week or so ago we announced
that we're working on a physical
magazine which Dives deep into the
upcoming UK general election but it
turns out the designing a magazine isn't
all that easy so I headed to skillshare
to take a look through some of their
design courses including the incredibly
helpful course how to design a magazine
and learn in design which helped me to
well do both things this means unlike
when I trying to learn in design for
another Never released project a few
years ago I was guided through the
process quickly and efficiently and this
time the project will actually see the
light of day thanks to skillshare's
incredibly easy to follow guides it's
not just that either you likely already
know that skillshare is the largest
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another course that I used when building
the website that sells the magazine and
the best news is the first 500 people to
use the link in the description will
receive a one month free trial of
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