In a blog post this past week, he assessed an Nvidia predecessor: Intel, the great chip designer of the last generation. He described it as an aging superstar that needs to accept a lesser role in the corporate universe. Intel, which was founded in 1968, was as dominant in its early years as Nvidia is now. At the moment, it is trying to compete not only with Nvidia as a designer but with Taiwan Semiconductor as a manufacturer. Intel’s share price has fallen nearly 50 percent over the last year, to a level that Professor Damodoran finds attractive. He says it can prosper as a sensibly conservative enterprise with pared-down ambitions.
But Nvidia seems to still be in its growth phase. Larry Ellison, founder and chairman of Oracle, told analysts on Monday that just one of Oracle’s new A.I. data centers will contain “acres” of Nvidia chip clusters. Monumental purchases of Nvidia equipment are “required to stay competitive in the race to build one, just one, of the most powerful artificial neural networks in the world,” Mr. Ellison said. OpenAI, whose ChatGPT bot set off the A.I. frenzy, is raising billions to buy more computing power — much of it coming from Nvidia equipment.
The total market for the kind of A.I. technology supplied by Nvidia is $60 billion a year, Professor Damodaran estimates, but it can grow to $500 billion in a decade. Nvidia’s share of this A.I. infrastructure revenue is now 80 percent. If the company stays on top of its game, that share may drop only to 60 percent, which would keep the cash flowing. Similarly, while Nvidia’s profit margins are likely to fall, he projected that they will be high enough for Nvidia to remain highly lucrative.
Putting all that together, Professor Damodaran’s assessment of Nvidia, which he acknowledges is imperfect, changeable and, at best, one man’s view, won’t please die-hard Nvidia enthusiasts, but it’s still relatively positive.
After its meteoric rise, he said, Nvidia was roughly 20 percent overvalued before it started rising again. “It’s a solid company,” he said. It’s just a bit overpriced at the moment, he said, adding that another wave of mass enthusiasm could propel it even higher.
Source: nytimes.com
