An investor's chart shows Nvidia's revenue climbing while its price to earnings multiple keeps falling, which he calls ridiculous
This is starting to get ridiculous... $NVDA
Context
The gap between Nvidia's growing sales and its shrinking valuation multiple sits at the center of the debate over whether the AI chip selloff has gone too far.
This is market commentary from an individual investor account, not a news report. The chart does not say how the P/E is calculated or where the estimates come from, beyond a VJN.ai credit.
- Quartz: Nvidia stock is approaching its cheapest valuation in a decade, citing Bloomberg
- CNBC Daily Open: Is the AI sector losing its rose colored glow?
- Advance Intelligence: Polymarket says Jensen Huang called the AI stock selloff temporary
- Advance Intelligence: NoLimit says Nvidia is at its cheapest valuation in a decade
Deep dive
On October 17, the investor account Dray posted a chart of Nvidia with the comment that this is starting to get ridiculous.
The chart, credited to VJN.ai, shows Nvidia's quarterly revenue as bars from 2016 onward, rising steeply from 2023 to about $100 billion a quarter in 2026, with estimated bars through late 2027 above $200 billion. A line for the price to earnings ratio spikes above 200 times in 2023, then trends down through 2025 and 2026, though it was lower still around 2018. The post does not state the exact current multiple.
The post came at the end of a hard week for chip stocks. CNBC reported on October 16 that 20 of the most valuable AI and semiconductor stocks had shed more than $1 trillion in value that week amid rate worries, AI financing concerns and competition. MarketDash reported that Nvidia fell 5.7% for the week and that the Philadelphia Semiconductor Index was about 22% below its June record.
On valuation, Bloomberg reported in September that Nvidia traded below 17 times forward earnings, near its lowest in more than a decade, even as revenue and net income were expected to grow about 90% this fiscal year. Other outlets cited higher forward multiples in mid October, around 24 to 25 times, so figures vary with the earnings period used. Nvidia reported second quarter revenue of $96.2 billion and guided to $108 billion for the third quarter, which it reports on November 17.
What to expect next
Watch Nvidia's November 17 earnings, where its fourth quarter guidance will test the revenue estimates shown in the chart and whether the market rewards growth with a higher multiple.
Also watch chip stocks as rate expectations and concerns over AI financing evolve, and whether investors treat the low multiple as a buying signal or as a sign they doubt current earnings will last. Gross margin pressure from memory costs is one factor analysts have cited.