) stock is once again experiencing a monster run, being up about 13% in October alone. The advance has taken the year-to-date appreciation for the market darling to an astounding 180%. Underneath the surface, excitement continues to build on Wall Street about Nvidia’s new AI chip dubbed Blackwell. Sector analysts are chattering about a big positive fourth quarter surprise amid the initial rush of Blackwell demand.
And what we have learned over time is that the more computing you give to companies to application developers to the software industry, the more new business models they are going to create. What is it like as an analyst on Wall Street, covering the world's most popular stock, if not company?Not on valuation per SE, because I think that especially with technology stocks, valuation sometimes is a lagging indicator, right?
So let's say if we do a three year earnings model for NVIDIA, let's say we are able to come up with a 25% earnings during that time frame compound growth.The PE multiple has no predictive value. It's not the start of the process to pick a random stock and say, 0, 30 PE is good or better because it's above or below the market that that's not the case right at all.In the last five years, NVIDIA has consistently bottom at about 2425 times earnings.
But I hope that we do a better job of making sure that we are getting the theme right, because I would rather be a little early, right to a theme than be very late, right to a theme. So here they are able to sell complete rack scale systems right, which is the other point with NVIDIA that you can't just look at their sales and compare it to the semiconductor industry addressable market because they are really a system integrator at this point, right?
You need to connect 30,000, 100,000, a million of them together, and then you don't want the things that are connecting them together to be the bottleneck.And then the final place where I think you need to have innovation just from the semiconductor perspective, right is to make sure that the software right that is able to go and connect these things together is able to optimise.
That is why we look at earnings and cash flow multiples because they tell the real story, as opposed to doing a lazy price to sales multiple.That doesn't make it cheap, Right on a price to sales. So no, I think that they are doing a tonne of investments right around the ecosystem to make sure everyone is equally prepared and going at this together because it doesn't help to just have all these shiny new pipes, but nothing to put right on them.
It's a very services based model, so when you're trying to do both, you're essentially saying you know what. Right When we had this recent malware attack on all the computers, it was into laptops with V pro that were able to be bought up very quickly.Um, right I i it it has been what NVIDIA is to generative a I That is what they have been to that CPA market and PC and so forth.
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