Sean D. Emory
Founding Partner & CIO of Avory & Co., Avory Foundational ETF (AVRY)
Nvidia's $14 billion purchase of Hugging Face deepens a conglomerate discount that has been building. The business may be getting more insulated, but it is also getting harder to understand, which could add to the stock's lack of a multiple premium. This is a caution rather than an outright bearish call. x.com
Nvidia's optically attractive valuation likely means the market already sees the other side of the AI buildout. Corrections will come as AI capex growth eventually slows, and, as with internet and mobile, it often takes multiple cycles to find the true winners and durable margins. Its earnings multiple is not as stretched as assumed, and its cash flow, balance sheet and leadership in chips, networking and rack-scale systems make it resilient, so it may not lead the downside. x.com
Antitrust scrutiny of Nvidia's Hugging Face deal puts the duration of its AI-stack valuation at risk. Per Reuters, the DOJ is probing the roughly $13 billion deal. The near-term tests are whether it faces an unwind, conditions or delay, and how labs price dependence if model hubs concentrate under the same chip vendor. x.com
Nvidia faces risks on both sides of the AI cycle. Vendor financing is a concern at the center of the buildout: strong AI sentiment brings competition, while weaker sentiment brings a slowdown. That makes it the largest holding of greatest concern. x.com
Nvidia's valuation gives too little credit to its expected long-term earnings growth. Its forward P/E-to-growth ratio is 0.28, the lowest since late 2023; the bullish read depends on those growth expectations proving accurate. x.com x.com
NVIDIA looks close to the top of an AI bubble, with a two-year megaphone pattern signaling exhaustion of growth. Such expanding, volatile patterns historically don't end painlessly. Its roughly 22x valuation on a $4.8 trillion market cap and $216 billion profit is approaching Cisco's roughly 30x in 2000. Nvidia just raised $25 billion in debt, drawing $85 billion of orders. x.com x.com
NVIDIA is out of favor because this market doesn't want any more circular financing deals. The pushback extends to the deals linking NVIDIA with Microsoft and Oracle, while Apple was trading up off the open. x.com 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 margins are effectively fake because it round-trips its revenue, and its reported $250B financing guarantee for OpenAI's Ohio data center looks one-sided and independent of chip sales. That $250B exceeds all of Nvidia's lifetime AI profits, as Dr_Gingerballs pointed out, and its downstream entanglements mean its true margins are lower. x.com
AMD is trading at its highest valuation in a decade, and another comparison puts it at about three times Nvidia's valuation. x.com
Nvidia's cash could have more value invested in AI companies with strong demand but too little capital to scale, especially neoclouds that can execute. Their valuations look very attractive now, making equity stakes preferable to more buybacks or dividends despite criticism of circular deals. SpaceX may need the money less because it is already very big. x.com x.com x.com
Nvidia feels like Microsoft and Amazon last year: well owned and positioned, very cheap if the numbers are sustainable, yet likely to see its multiple compress for 12-18 months until frustrated longs sell. x.com
