Nvidia's Valuation Is (Mostly) About the Future

While only time will tell whether or not Nvidia’s current valuation is justified, one thing is certain: Its current market capitalization of $3.34 trillion is based on expectations for future growth more than it is on current results. While Nvidia saw its revenue and profit surge at an extraordinary pace over the past year, it is still far from the levels that its fellow $3+ trillion companies Apple and Microsoft have been consistently reporting for the past few years.

As our chart shows, Nvidia revenue for the past four completed fiscal quarters adds up to $79.8 billion, or 21 percent of Apple’s revenue for the comparable time frame and 34 percent of Microsoft’s revenue. In terms of profit, Nvidia is already closer to its fellow market cap heavyweights with its $42.6 billion in net income in the trailing twelve months equivalent to 42 percent of Apple’s net profit and 49 percent of Microsoft’s.

Where Nvidia sets itself apart is a) its gross margin of 78.4 percent in the most recent quarter (46.6 percent for Apple and 70.1 percent for Microsoft) and, most importantly, its current growth. Compared to the same 12-month period a year earlier, Nvidia’s revenue grew 208 percent in the four most recent quarters, compared to 1 percent negative growth for Apple and Microsoft’s 14 percent growth. For the current quarter, Nvidia expects another 100+ percent jump in revenue, but the question is how long the company will be able to sustain this pace of growth or the extraordinary demand for its chips that power the transition to an AI-based future of computing.