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Nvidia, with a market capitalisation of $4.5tn or so, is the most valuable company in the world. Its share price has risen 700 per cent in three years and its sales have grown at a rate of 100 per cent annually over that period. But even for the greatest growth stories, at some point every possible expectation is priced in and every investor owns as much of the stock as they want.
The chip group late on Wednesday reported another blockbuster quarter with $68bn in sales, topping analysts’ expectations. By Friday afternoon the shares were off about 10 per cent, although they retraced some of their losses. This repeats the usual pattern of most quarterly reports going back to the middle of 2024: epic growth, expectations surpassed — and an unimpressed market. Over the past six months, Nvidia’s shares are roughly flat and are underperforming the S&P 500.
There is no sign that data centre spending, and therefore sales of Nvidia’s GPU chips, is slowing down any time soon. But the longer-term future of the AI industry is coming into doubt as questions swirl about the return on investment from data centres and the impact of AI on employment and the economy. Despite its runaway growth, the company has lost its valuation premium: its forward price/earnings ratio is the same as the S&P 500’s.
Are we witnessing a pause in investors’ love affair with Nvidia? Or has the relationship changed forever? Let us know your thoughts: [email protected].
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