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Comment by klelatti | Hacker News Reader

I think in many ways Arm is (or should be) a sort of large 'Mittelstand' [1] business. Long term focus, independence, customer focus etc are key to the success of this type of business.

Trouble is, its success and its sector has given it a profile that attracts attention from the likes of Softbank who have other ideas. A company doesn't need to have a Nvidia like P/E ratio to be successful.

[1] https://en.wikipedia.org/wiki/Mittelstand

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You may be right. In that case they should offer a dividend to attract the kind of investors who are not necessarily looking for big gains in the stock price, but want a nice stable return. ARM was a growth stock for decades, but that phase is over for them.

> A company doesn't need to have a Nvidia like P/E ratio to be successful.

Absolutely true. Sadly nowadays, especially in the US, and especially in tech, unless the company is growing like crazy or massive, it's considered as insignificant and dimissed.

How are they “dismissed”? Are trading volumes or share prices for non crazy or massive companies too low?

> especially in the US, and especially in tech, unless the company is growing like crazy or massive, it's considered as insignificant and dimissed

Maybe in Silicon Valley, were decades of totem disdain for anything resembling a business education is starting to take its toll. For anyone with a financial background, slow-growing profitable companies are most American industry. If you want to grow slowly (or barely at all), and want investors who like that, offer a dividend and price at a reasonable P/E.

Dismissed by who? Dismissed by the media and public is one thing, but if you think investors are also dismissing them unfairly, that doesn't sound unfortunate at all. That sounds like an investment thesis.

Do people use P/E as a metric for company success? I find the Nvidia one of 223 or so just a gross perversion, no real success there. It’s more about how irrational the average investor is now and how top heavy the SP500 is.

I think it’s a reflection of earnings potential. If nvidia can average 50% Y/Y earnings growth for the next 5 years, and stock price remains flat, that 223 falls to 30.

It is a reflection of exactly that, but this completely dismissed all the risks: - Maybe new ml-tech is invented that does not require as heavy equipment. - Maybe AI does not grow as fast as expected. - Maybe a competitor comes along and pricing comes under pressure. - Maybe supply chain issues.

Nvidia is interesting on multiple fronts. For one, GPUs aren't just useful for ML. Secondly, ML isn't just LLMs. I also find their bet on USD to have been vindicated by other industry players, and their Omniverse/digital twin concepts are going to be important tools for media, robotics, research, among other things. I'm not so sure their P/E isn't absurd, because it probably is, but you're not betting on just one horse with their stock.

You can easily make maybes in the other direction too - maybe they maintain their absolute market dominace, like Intel for years and years. Maybe they come with a technology jump that will be hard to beat for a long time, like M1. We are probably in the early adopter stage of current AI too.

Predicting the future is hard. Stock prices are based on extrapolated current information and mostly hype.

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