Daave “3 and 30” Tepper
Institutional Endowment Investor
Growing chip competition is likely to squeeze Nvidia's GPU margins. Nvidia and frontier labs are most at risk as current AI buildout math would be unsustainable without margin compression. Even if token use keeps exploding, open-source progress should lower end-user token costs, while rising capital costs should weed out unprofitable compute sellers. x.com x.com
Nvidia's 0.39 PEG suggests its valuation is low relative to growth. Its 26.56x P/E and 17.55x forward P/E are below their respective ten-year medians of 50.36x and 26.5x. x.com
Nvidia's rising revenue alongside a much lower P/E is getting hard to ignore. Its chart shows quarterly revenue above $80 billion in Q2 2026 while the P/E is around 30x, down from much higher multiples in prior years. x.com
Nvidia's equity-investment book makes earnings vulnerable to an AI valuation downturn even if GPU sales hold up. Private and public stakes totaled about $99bn, or 31% of assets, in July; gains were $15.9bn in April and $7.8bn in July. Private holdings are marked on observable transactions or impairments, so losses could arrive in lumps. Nvidia generated about $127bn of free cash flow over four quarters, and the filing does not split private stakes by sector. x.com x.com
Nvidia looks interesting again because rising earnings estimates have not been reflected in its valuation. FY28 EPS estimates rose about 25% in 60 days while shares stayed roughly flat; it trades below 14 times FY28 earnings with a mid-single-digit free-cash-flow yield. Exponential change is hard to grasp, and it is hard to see Nvidia not winning if the US does, though there is little capital to absorb market wobbles. x.com x.com
Nvidia's earnings growth has outpaced its share-price gains, challenging the bubble claim. The attached comparison indexes both to 2020 and shows roughly 70x GAAP earnings versus 36x share price through 2026. x.com
Rising Chinese competition and doubts about valuations add to Nvidia's downside risk as the AI sector bleeds. Nvidia's break from an uptrending triangular pattern rarely ends well; the AI bubble is cracking, and the trendline break marks the beginning of something much bigger. x.com
NVIDIA's projected earnings growth could support substantial upside without an enormous multiple. At $221.97 it trades at 10.4x estimated FY2029 earnings; even at $350, nearly 58% higher, it would trade near 16.4x. Estimates imply roughly 130% cumulative EPS growth over the next two fiscal years and may be conservative. SpaceX and Meta earnings look bullish for future chip demand. Slower AI spending, margin pressure or competition could undermine the estimates. x.com x.com
AI skepticism leaves Nvidia, Broadcom and Micron looking cheap on forward earnings. Their forward P/E ratios are 14, 18 and 5, respectively; the market may eventually stop doubting AI. x.com
Nvidia's AI profits are real, but its compute demand depends heavily on fragile venture funding. Per Chamath, 1% of firms account for 90% of AI spending, and 72 cents of each dollar comes from unprofitable VC-backed firms. Venture money passes through startups to Nvidia and cloud suppliers; if the next raises fail, concentrated orders could contract together. x.com x.com x.com
Nvidia has never been cheaper on trailing earnings despite being the past decade's best-performing stock. Its trailing P/E is about 27.1x, near the bottom of the five-year range. x.com