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Comment by TheAlchemist | Hacker News Reader

Nvidia valuation = $3000B

Nvidia profits during AI madness last year = $65B (last 4 quarters)

Nvidia profits during normal year = $5B

This stock could drop 90% from here, and still be expensive. The numbers are absolutely crazy and make no sense at all.

Stargate project is aiming to invest $500B over 4 years. Those $500B are a pipe dream, but let's suppose for a second that all of that $500B will be Nvidia profits and that we will have another Stargate project in 4 years, again resulting in a direct profits of $500B for Nvidia.

And you know what ? In that scenario Nvidia would STILL be overvalued by historical standards !

EDIT: Changed $30B from the fiscal year, to $65B for last 4 quarters.

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Your numbers are wrong. The last quarter profit was $19B and the projected profit is 21B next quarter. That is 84B/year profit with zero growth.

If META,STARGATE,xAI,etc.. all increased spending rapidly you could get to 200B profit rate in 2026.

3T / 200B = 15

That means they could return a 6.6 dividend which is higher than 10 year bonds and is in no way overvalued by historial standards.

All that to say, I sold all my NVDA last month because I don't think Wall St. is buying that everyone is going to actually invest that much.

You're right about the profit - I took last fiscal year. Still, it doesn't change anything in what I wrote.

What you just wrote is "IF the biggest companies on earth, and the US government decide to spend all of their money on a single chip maker, then you could get to 200B profit rate in 2026". I won't disagree with that.

Agreed, it's very strange to me that this is being framed in the media as "CHINESE DEEPSEEK DESTROYS US STOCK MARKET". It's a good model, but not so wildly good that it suddenly destroys Nvidia somehow. The stock was (and remains) incredibly overvalued.

This smells a lot to me like someone with deep pockets is looking to get a bailout by framing this as some kind of Chinese threat.

Any time the entire media suddenly agrees on a very strange framing of a story you should immediately be suspicious.

The vibes market

> And you know what ? In that scenario Nvidia would STILL be overvalued by historical standards !

It would makes it's PE ratio about 24 (3000/(500/4)).

AAPL's PE is about 36 at this moment.

So no, not "overvalued by historical standards".

If you take a longer time frame, these PE ratios are indeed pretty high. Even 24 is much higher than the ~15 historical median https://www.multpl.com/s-p-500-pe-ratio

Exactly.

Also, what he’s saying is if 500/4 =125B were NVDA yearly profits (and of course really that would just be revenue, not profit), it’d still mean NVDA should be more like 1875B market cap at a more reasonable 15x price to earnings ratio. If I understand the previous poster correctly.

The Stargate project does not actual exist. It is just something they completely made up by lumping together data center investments from across the industry and rounded up to the nearest $500B

Indeed, perhaps the plan was to pump certain stocks after they saw the unprecedented post election rally of Tesla and Bitcoin.

And these people complain about the Pelosi index, which is peanuts in comparison.

but you forgot the 80B from MSFT and 60B from META in 2025 alone? I assume quite a chunk of that investment will be going to NVDA.

Stargate wise, it's a joke, they have no money for their lip service.

Most of it will go towards energy. These companies are building literal power plants to power their data centers.

>These companies are building literal power plants to power their data centers.

Have any companies publicly announced doing that, let alone actually started the process of building?

One example of restarting a previously shuttered nuclear power plant to power a data center.

https://www.technologyreview.com/2024/09/26/1104516/three-mi...

Although the fine print is that it will be dumping power into the grid to be pulled out by various DCs vs powering them directly

There is an ongoing debate about these companies drawing direct power from private plants vs going through the grid, but I can't see why big tech won't win in the end, especially in today's environment of deregulation.

Are you suggesting "AI madness" is a one time event that will not continue? AI is dramatically improving productivity and not just for developers. The "madness" will continue until every job is fully automated. That requires a lot of chips.

"AI", once we get there, is indeed the future and will continue to play an increasing role everywhere.

But what happened to Nvidia profits last year is a one time event and will get back to normal sooner or later.

> last year is a one time event

It is repeating this year as well, given all the announcements. So maybe it is a two time event? I think it could repeat every year as long as Nvidia continues to innovate and keep their lead.

DeepSeek is providing an efficiency boost, and that doesn't kill Nvidia. In fact, Nvidia themselves delivered an efficiency boost with Blackwell chips. DeepSeek is a one-time efficiency boost, but Nvidia will continue to boost efficiency every year, based on Moore's law.

Since we're talking about GPUs here, you might be interested in reading about "Huang's law" rather than Moore's:

https://en.wikipedia.org/wiki/Huang's_law

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