Nvidia: unstoppable force, or powering down?

In the run-up to last week's quarterly update from the world's most valuable listed company, there were fears that lacklustre results might trigger a traumatic tech-sector correction. In the event, said Dan Gallagher in The Wall Street Journal, Nvidia's boss Jensen Huang trumpeted yet another period of record revenues and profits.

Sales of Nvidia's world-leading, AI-powering chips surged 56% year-on-year to almost $47 billion – above market expectations. It's Nvidia's slowest growth rate in two years, but it's far more than what other "megacap tech companies are currently managing". And that's with sales of AI chips to China "effectively shut off owing to national security concerns".

China is the big unknown here, said Dewardric L. McNeal on CNBC. What worried me most was the zero revenue from Nvidia's China-specific H20 chip. Alas, US-China tensions are holding it back, just as one of China's challengers, Cambricon Technologies, is "surging". Another likely brake on Nvidia's growth is the vast amount of electricity required to power the AI revolution, said The Economist. An "unstoppable force" is about to come up against "an immovable object. Or at least an object that has not moved much in decades – America's power grid."

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Nvidia now trades at a price-to-forwardearnings multiple of 33, a little more than Microsoft or Oracle, but with faster-growing profits, said Lex in the FT. On the PEG ratio (price to earnings, adjusted for growth) it "looks positively cheap". The snag is that the bulk of its current $4.4 trillion valuation rests on "punchy" assumptions about post-2030 revenues. And its 72% gross margin, higher than Apple ever achieved, is an "open invitation to competitors". Huang tells "a compelling story about the world AI will create", and Nvidia's central role in it. "But for now it really is just a story."