Nvidia's Valuation Is Still Mostly About the Future

While only time will tell whether or not Nvidia’s current valuation is justified, one thing is certain: Its market capitalization of roughly $3 trillion is based on expectations for future growth more than it is on current results. While Nvidia saw its revenue and profit grow 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 $96.3 billion. That's a quarter of Apple’s revenue for the comparable time frame and roughly 40 percent of Microsoft’s. In terms of profit, Nvidia is already closer to its fellow market cap heavyweights with its $53 billion in net income in the trailing twelve months equivalent to 52 percent of Apple’s profit and 60 percent of Microsoft’s net income.

Where Nvidia sets itself apart is a) its gross margin of 75 percent in the most recent quarter (46 percent for Apple and 70 percent for Microsoft) and, most importantly, its current growth. Compared to the same 12-month period a year earlier, Nvidia’s revenue grew 195 percent in the four most recent quarters, compared to 0.4 percent growth for Apple and Microsoft’s 16 percent growth. For the current quarter, Nvidia expects another 80 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.