Nvidia's AI Bubble: Valuation, Promises, and Risks

Nvidia's potential as the next Tesla in the AI market is uncertain due to inflated stock prices and potential risks.

### Nvidia: Evaluating the $6 Trillion Market Cap Bull Case
* 📈 According to the bull case scenario, Nvidia's market capitalization would need to reach **$6 trillion** for investors to achieve a **good 5x return** on this risky investment.
* 📉 However, the bears warn that the stock could potentially **lose 50-60% of its value**, as it has experienced **significant drops in the past**.
* 💰 Despite Nvidia's impressive **$80 billion in revenues** and **$40 billion in cash flows**, everyone is chasing the **50% net profit margin**, making it a **challenging target to sustain**.
* 🏗 The global semiconductor cycle, characterized by **booms and busts**, poses a persistent concern for Nvidia's **long-term prospects**.
* 💸 "At one point, people start understanding that we need **cash flows, not just promises**."
* 📉 "Everything gets **more ugly**, like we are seeing now with Tesla."
* 📉 "I don't think the risk justifies the **potential reward**."
* 🤖 Nvidia is at the center of the AI stock bubble, with **high expectations surrounding its future growth and profitability**.

good day, Phil investors. Will Nvidia be the next Tesla? We have discussed a few days ago how the AI is in a bubble, and there have been many comments discussing how it is not 100 billion in earnings. The numbers don't lie. I sell bad news, whether I went short or ready. Of course, I might be an idiot on the bubble, but I'm not stupid to short because anything can happen in a bubble. I miss the fundamentals, the packaging, 3D architectures, hungry data computer Predator competition will not destroy margins. It's specific. Winner Takes it all again. Then, of course, there's a difference between internet and AI. Internet is flat, but AI will be paying more by volume. The more AI they use, the more it will cost them. That was the same with the internet. Just FYI, if Bitcoin is going to zero, why Black Rock keeps buying it? Because Black Rock buys whatever there is out that with your money. They make money on fees. And in general, when it comes to discussing Nvidia, Bitcoin, Tesla, marijuana stocks.

whatever has been the hot topic over the last decade, I always get the feeling in the comments, then you need to educate yourself, you need to have the same mindset as we have, you need to read the same things, and you need to believe the same things. If you think differently, you're an idiot, you will lose money. Uh, then they start attacking me, same old story, but something more dangerous and more related to what we speak here when it comes to investing is this: eventually you'll be right, but in the meantime, we can make a lot of money. Never pick the bottom, attack on me, etc. And this is the danger here, a lot of you fear of missing out, let's play it, let's play it, see where it goes, and that game adds to the pushing higher and higher. And then there is a question of valuation. I thought it was a regular question, but then it is just what price. I didn't analyze it, was again an attack on me, but I thought, okay, let's do this comparison: Nvidia, Tesla, and put it into a categorization just to

separate the things there are bulls bears and people that want to see. Okay, is there something I want to have a relationship with this bubble or not? This is the answer value investors are looking for. If I look at the stock chart, okay, Nvidia done greatly but then I look at the numbers and the price is 120 and also analyst consensus is for a p ratio of what is this 30 on the current stock price. In the next three four years, if I look at the revenues, we are talking about price to sales of 101 five years down the road. Of course, if everything will be AI stores, everything is going to be roboticized. We don't need humans anymore. Taxi, you won't drive, you won't do anything anymore, we'll just get fat and lazy. Then yes, that growth is now priced in the stock. If it happens, Nvidia will go to the bull case of $15 trillion dollar market capitalization, which is necessary for you to make a good 5x on this Risky Business. 15 trillion, keep in mind, is 40%.

of the current market capitalization of the S&P 500. But the promise is there a new Industrial Revolution. It might be right like the internet. It will be probably right. But there is also others, of course, Intel can't be compared because it's an old B mon. But okay what I want to mention with Intel is not their competitive Advantage but there are constant delays that always come when it comes to investing in these businesses. You might think 2024, 2027 what if there is a delay of two years that lowers the price valuation by 50% because the money comes later the competition increases margin squeeze is it completely changes the valuation of a business delays and also promises Tesla Robo taxi to unveil 8 of August and you see the Tesla stock price Robo taxes cars Giga Mega factories whatever everyone was so excited then the Tesla bubble started to slowly pop and now not even the promise of robot taxes helps the stock because here we are eventually the competition catches up prices go down free cash flows become negative profits.

barely positive, and the company starts losing money. It doesn't work. Let's make a new promise. Let's go to robot taxes, data robots, whatever. But then, if you look at the investments, it wasn't profitable. Electric cars were not profitable. Now, something else will be, and there is always this promise of things will change. But this is the truth, these are the numbers, and now you can buy electric cars by every car company out there. So, the competition squeezing margin, it just leads back to average industry prices, and very hard to have a long-term competitive durable advantage in whatever here because every other company with money will chase your profits. Tesla is chasing everyone with robotics, computers, whatever. So, hundreds of other companies, everyone wants to be in the hot space, and the result is this. There could be some profits pushing the bubble higher and higher. Eventually, reality hits in delays, profitability becomes an issue, and we have this on AI from The Wall Street Journal. The industry spent 17 times more on Nvidia chips that brought in revenue. 50 billion spent on Nvidia. We see that on Nvidia's

Revenue, but they brought only three billion in revenue. When that normalizes, the companies will spend less. Nvidia's chart will look like Tesla's financial chart. Further, now we are in a bubble. Everyone needs to spend, everyone needs to look smart, citing AI on earnings calls over the last 10 years. Look at the explosion. Now it gets hot and interesting. The most exciting is, of course, Nvidia, Salesforce. They haven't been doing that great, but Cadence Design Systems, they are all into AI, and I thought that stock must have boomed. That is correct. Revenue 4 billion market cap, so price to sales of 20. But that's how it goes. It will change the world, so it's worth to pay a price to sales ratio of 20. Of course, Information Technology, communication services, and even materials are mentioning AI. Reminder, blockchain was the hot topic in 2018-19. Those mentions plummeted already started to plummet in 2019, and now we are mentioning AI are going high. So when it comes to investing, okay, bull case, the bullish of case is 15.

trillion. You know that that's a bit stretched. But if you want to make a 5x from here on Nvidia, it has to go to $1.15 trillion dollar, 2x $6 trillion dollar, and then you start feeling, Okay, this is a little bit stretched. I can make a 2x. But if it doesn't happen, then there are the Bears and you can lose 50-60%. We don't need to go far for that. Just a year and a half ago, the stock price was that low. So be careful on that. And then there is the value investing side. Do I want to have something to do with that $6 trillion market cap to make money in the next seven years just to get a 10% return from Nvidia? That's the question you have to answer and see for yourself because if this happens, this is 60-70-80% down without a problem. Because yes, it looks great. $80 billion revenues, $40 billion in cash flows, everything looks great. However, everyone is after

this 50% net profit margin. 50% net profit margin. Hell, I should start talking about AI learning about making those chips and making money. However, another topic, there is the global semiconductor cycle, and there is always the same story. The Boom, the bust, the bust, and some people say it will go on forever. This time is different. But another worry, here we have not seen recession. Check this video, we'll put it in the link here. For 15 years in the US real economic recession. And then I'm looking at things all about promises, promises, promises. At one point, where people start understanding that we need cash, we need cash flows, not just promises. Then everything gets more ugly, like we are seeing now with Tesla. I hope it doesn't happen with Nvidia. I hope you all make your money. But I'm just telling you why I'm not playing that game. Or am I who is making money on Nvidia if I look at my last 10 videos stratospheric performance from the AI stock bubble. So as long as you watch it, I can keep.

making this videos and let's see the performance. Don't worry investing I don't have much to do with it, but tomorrow we'll discuss Val yesterday. Ulta so don't worry. We won't stray off the value investing focus on this business but nothing to do with it from an investing perspective. I'm just as always as a value investment discussing the risks what can go wrong what can go right. And I think Nvidia can go to Six Trillion in market cap. You never know it's just a few stock prices BuyBacks and squeezing that price higher and higher. However, I know there is the cycle recessions investing delays etc. etc. And I don't think the risk justifies the potential reward. That's just my opinion and I just wanted to discuss as the comments exploded. The views exploded and let's see where it brings us. Hope you enjoyed tomorrow pure value investing.

NVIDIA the next TESLA? (50% DOWN)

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Value Investing with Sven Carlin, Ph.D.

The Debate Over Nvidia's Future and Its Comparison to Tesla

There is a debate over Nvidia's potential to be the next Tesla, with discussions about its AI involvement and financial fundamentals.

The comments also touch on Black Rock's investment in Bitcoin, the pressure to conform to popular mindsets in investing, and the fear of missing out.

There are concerns about making money in the short term versus the eventual rightness of investment decisions, as well as the ongoing question of valuation for companies like Nvidia and Tesla.

Nvidia's stock has performed well, but the high price and P/E ratio indicate that future growth may already be priced in.

The potential for a $15 trillion market capitalization is tempting, but the risks of delays and increasing competition could significantly impact the company's valuation.

The cautionary tale of Tesla's stock and the potential challenges of the AI revolution further emphasize the uncertainty surrounding Nvidia's future prospects.

The Truth About the Profitability of AI Investments

Many companies, including Tesla, are struggling to make profits despite heavy investment in AI and related technologies.

The industry is currently in a bubble, with high spending on AI technology that is not yet translating into significant revenue.

Despite the lack of profitability, AI remains a hot topic for investors, with many companies, such as Nvidia and Salesforce, heavily involved in AI seeing high market valuations.

Investing in Nvidia with the expectation of a 5x or 2x growth is cautioned against, as it could lead to significant losses.

The company's high net profit margin and promising AI technology are attractive, but the volatile global semiconductor cycle and potential economic recession are causes for concern.

The speaker is hesitant to engage in the game of Nvidia stock investing, despite acknowledging the potential for profit.

Discussion on Value Investing and the Potential of Nvidia Stock

The speaker discusses the potential performance of Nvidia stock and expresses caution about the investment.

They emphasize the importance of value investing and the risks involved in the current market.

The speaker acknowledges the audience's interest and plans to continue focusing on value investing in the upcoming video.