Is Nvidia still a billionaire maker stock?

Historically, few companies have demonstrated the potential of more billionaires nvidia (NVDA) 0.90%)). The tech giant’s stock has skyrocketed over 22,000% over the past decade, generating wealth for many shareholders In the process.

However, it has a market capitalization of $3 trillion, and Nvidia is already the third largest company in the world. The growing concerns about the sustainability of AI hardware spending have raised questions about how realistic it can rise. Let’s dig deeper and see what the future holds.

The AI ​​hype cycle is getting longer in the teeth

Since Openai’s ChatGpt was launched in 2022, the tech giant has been rushing to stay competitive in the market Big language model (LLMS), a type of AI algorithm that can create conversational responses based on a trained dataset. To this end, they have poured billions of dollars into purchasing Nvidia’s cutting-edge graphics processing units (GPUs) to train and run these complex programs.

for The so-called hyperscolours like Alphabet and Amazonthis spending clearly has business implications This is because AI computing power can be “rented” to startups through cloud computing platforms. However, for other major clients Meta Platform (This is planning to spend between $65 billion and $65 billion mainly on AI-related matters. Capital expenditure), the potential returns to pour a lot of money into the nvidia hardware look weak.

Meta appears to be trying to remain relevant to opportunities that I don’t have it A clear way to monetize. And it may be only a matter of time before the company’s shareholders oppose all this speculative spending. Otherwise it can be used Share dividends or buybacks.

Nvidia’s operational momentum continues to be strong

Although current AI spending may prove unsustainable in the long term, this challenge has not yet been manifested in Nvidia’s operational results. Q3 revenue rose 94% to $35.1 billion, based on massive demand for high-end data center chips to train LLMS.

Despite selling hardware, the total profit margin for many software companies is the margin for many software companies, with operating profit doubled to about $21.9 billion in the third quarter.

Products based on Nvidia’s new Blackwell GPU architecture are committed to supporting continuous growth and profitability over the next quarter. And so far, the emergence of low-cost Chinese rival Deepseek (who claims to have trained industry-leading LLMs with “primitive” H800 chips) has led to the demand for Nvidia’s latest chips There is little evidence of it being damaged.

Some industry experts argue that Deepseek may have technology that has been improperly copied from US rivals like Openai through distillation. This is the process of transferring knowledge from a more advanced model to a smaller model. In the truth, this suggests that even if others later copy these models using inexpensive chips, Nvidia’s cutting edge GPUs still help to create the most advanced LLMs I will.

Image source: Getty Images.

The rating remains attractive, but the benefits appear to be limited

With just 29 (p/e), the inventory is surprisingly affordable and takes into account its incredible growth rate. For context, the NASDAQ-100 has an average forward P/E of 31, even if most of its member rival Nvidia’s business expansion.

Even though I say that With its market capitalization of $3 trillion, it’s difficult to see NVIDIA generate multibugger returns from here, especially given that current AI hardware spending could begin to decline over time.

The age of equity billionaires seems to be far behind. And return investors should probably look for more under radar ways to bet on AI opportunities.