Whom have I in heaven but You? And there is none upon earth that I desire besides You. My flesh and my heart fail; But God is the strength of my heart and my portion forever.
Psalm 73: 25-26
The life of the Christian is one of constant recognition of God. Obedience to God is a form of seeking His truth and honoring Him. Through God’s love and His word, I can understand my need for God to help and guide me each day. When I falter because of my imperfection, I can always depend on God to be there to keep me going and to offer me peace and strength that cannot be gained anywhere else.
Investing, like most things in life, has its challenges and ups and downs. There is always some form of information flow to contrast an investment thesis. It is during times of stock market volatility and pressure that I need to remain focused on my investment strategies and objectives. This is where God’s word and wisdom is key because God is bigger than any of life’s problems or circumstances.
The next company in the Big-Tech investment series is NVIDIA Corporation (NVDA).
Key Takeaways for Retail Investors
NVDA is down 16 percent to start 2025, but the company still is trading at a premium at 43 times operating cash flow per share.
NVDA’s premium is reasonable at today’s level and even with expected multiple contraction over the mid-term, investors could expect to receive near 20 percent annualized growth.
The chip industry is going to see changes as the U.S. administration is keen on prioritizing America’s leadership in numerous technology industries. This represents an opportunity for NVDA.
When it comes to Big Tech, NVDA like Tesla, Inc. (TSLA), are the two growth leaders. This role will likely remain as both companies are willing to take the greatest risks to generate shareholder returns.
NVDA can be a difficult company to value. The company’s EV/Sales metric is not for the faint of heart as NVDA’s multiple sits north of 20 times. NVDA’s OCF per share has been contracting since the fiscal year 2023 peak and finds itself at a more reasonable level near 45 times. NVDA is one of the few Big-Tech peers trading at a premium, the other being Tesla, Inc. (TSLA). Most Big-Tech peers trade around 20 to 25 times OCF per share and while NVDA’s multiple will continue to contract, the expectation is for it to continue to sustain a modest premium, affording it good potential investment return value.
NVDA has witnessed two consecutive years of doubling growth, which has led to some of the most rapid acceleration that we’ve seen across the stock market as the company has eclipsed the $100 billion level. Since 2016, NVDA has only witnessed a couple of down years, during 2020 and 2023. NVDA remains controversial as bulls are expecting substantial stock price growth, notably as NVDA is down 13 percent to start the year. While NVDA likely has room to generate strong investment returns, investors should not expect NVDA to continue to double its revenue moving forward. Nonetheless, the company should be able to clear the $400 billion level over the mid-term by sustaining decreasing double-digit annualized revenue growth.
As NVDA has witnessed substantial revenue growth, the company has equally realized expanding margins. This has been a boon for cash flow, but investors should be cautioned that these levels may not be sustainable as NVDA will be looking to defend its market position. On the flip side, NVDA will continue to advance further and the longer the company can keep a massive lead against its peers, its margins may remain elevated.
There has been a clear correlation with NVDA’s revenue performance and margin improvement with respect to the company’s jump in its cash and investment position. Seemingly, it would appear that NVDA is headed to greater than $100 billion in cash as the company generated $54 billion in free cash flow alone during fiscal year 2025. But with the increases in share buybacks and potential for NVDA to make strategic deals, the rate of cash and investments growth may not be as robust.
To the point above, NVDA bought back nearly $35 billion in stock during fiscal year 2025. This rate of buybacks is likely to continue with NVDA’s expected cash flow margins being sustained over the mid-term. I personally am not a fan of share buybacks as it is used to align with Wallstreet’s earnings per share shenanigans. This is especially true for a company like NVDA witnessing annualized cash flow growth of nearly 70 percent since 2020. There is no need for the company to waste $35 billion on buying back stock and it would be much better suited to grow its cash stockpile and/or invest as much as possible back into the business.
NVDA’s revenue breakdown clearly illustrates just how powerful the company’s data center segment has been. Prior to fiscal year 2024, gaming has been the core focus of driving revenue growth for NVDA. Investors should expect to see other chip companies begin to ‘chip’ away at NVDA’s massive lead on data center growth. There are some who think that a few of these peers may even replicate NVDA’s robust data center revenue growth, but it isn’t going to be as simple. However, when we think about the aggregate competitive market globally, NVDA’s most robust growth days are clearly behind it.
Final Thoughts
NVDA is a great example of a company that gets too high praise and yet is still a great opportunity for investors. NVDA like Tesla, Inc. (TSLA) is taking much more risk than other Big Tech peers which translates to much greater investment return potential. NVDA is also unique, also like TSLA, in that the company has generated a substantial lead over its main competitors. The recent drop in the broader stock market has generated excellent buying opportunities for savvy investors. For those looking at Big Tech opportunities, NVDA offers solid upside potential.
There are items to consider, namely the U.S.’s chip policies, and the overall geopolitical environment including tariffs. Irrespective of political standpoints, many companies are poised to benefit from a stronger U.S. stance against globalism and I see NVDA as one of those companies. If the current administration is looking for substantial investments into the U.S., NVDA is well positioned to take part in this as well as to support the administration’s desire to lead the world on chip technologies.
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