You don't know Nvidia

The world has gone crazy for NVIDIA. All eyes on NVIDIA. NVIDIA, NVIDIA, or at least Wall Street has. Have you heard of NVIDIA? No, NVIDIA, Not familiar. I think they're a chip manufacturer, right? Something to do with technology. Something to do with technology that has almost single handedly lifted the entire market due to its monster valuation and latest monster quarter. NVIDIA basically is its own index right now. If you are actively trading in the market, you're trading NVIDIA every day. The best performer in the NASDAQ this quarter, surpassing $3 trillion in market cap and briefly snatching the crown from Microsoft and Apple as the most valuable company in the world. I'm Deirdre Bosa, and this week on Tech Check, NVIDIA, the stock everyone owns, but no one knows the largest companies in the world. They're typically also the most well known. There's Apple, with its billions of iPhones, Microsoft and its Windows and Office software. Google is essentially synonymous with the Internet. And there's Amazon, the world's largest online retailer. They're four of the biggest companies by market cap. And then there's NVIDIA, which for a few days surpassed even Microsoft and Apple. NVIDIA, now the world's most valuable company, still far from being a household name. Well, I've never heard of NVIDIA. I haven't heard of NVIDIA. In fact, the company doesn't even make the list of top 100 most iconic names according to consulting firm Interbrand. Getting beat out by the likes of IBM at #18 Salesforce at 38, even HPE at 91. Here's CNCS Kiff Leswing. It is really unusual. The last three most valuable companies have all been extremely well known around the world and NVIDIA is just just not not on that level. Part of it is that chip makers aren't consumer facing products. They sit inside and they power the devices we use. They're complex and they're measured in nanometers, not even discernible to the naked eye. NVIDIA hasn't made a big consumer facing marketing campaign like Intel did in the 90s. Intel, the computer inside, They spent a huge amount of money on something called Intel Inside, which basically promised, you know, that they would advertise on TV and in magazines. They built that brand up for for years, for decades. And it was also a little more mainstream. Intel's campaign helped it build a brand that dominated the PC market for decades and has had staying power. Despite a new chip order that has put NVIDIA firmly on top, Intel is still #24 on the Inter brand list. Now many people are scrambling to explain what NVIDIA is. What exactly is NVIDIA? What is NVIDIA? Here's Culito. Here's CEO Jensen Huang. We are a technology company that processes software for applications and domains of science that are barely possible without us. Huang himself, a leather jacket clad bonafide celebrity in tech circles and his native Taiwan to his stance. Just known as Jensen, but still largely unknown to most of America, even as the average investor's exposure to NVIDIA is greater than ever. When NVIDIA does anything, you're going to it. Literally, it's like what Apple used to be. As NVIDIA stock prices climbed, so has its market cap, giving it a heavier weighting in the S&P 500 and playing an increasingly larger role in the pension and mutual funds, or the exchange traded funds that track the major stock indices. In short, more average Americans are holding NVIDIA in their portfolios than ever before, whether they know it or not. And so as NVIDIA goes, so goes the market on the way up and on the way down. Chairs of NVIDIA thinking again, erasing more than two weeks of gains. The semi stock sliding almost 7% today, its biggest drop since mid-april, its worst three day decline since December 2022. While brief downturns have barely dented Nvidia's incredible run over the last few years, some investors are starting to ask how much more room is there for NVIDIA to run? Its market cap hit $3 trillion just three months after passing $2 trillion. Bears point to sanctions risk, competition catching up, unsustainable revenue growth, and, for some, echoes of ciscoandthe.com, boom and bust. The last time a tech company without mass brand recognition became the most valuable company in the world, Cisco rode the wave of the Internet revolution. Its products, like Nvidia's were the backbone of the industry. Its shares also overtook Microsoft and there were increasing warnings of a bubble, not unlike NVIDIA and today's AI revolution. Someone say that this extreme concentration is indicative of a bubble. Are these signs of froth? It didn't end well for Cisco. When the bubble did burst, shares crashed. And today, more than 20 years later, Cisco stock price is still 40% below those split adjusted highs. But part of a NVIDIA education includes knowing some of the key differences. 1 valuation. Nvidia's price to earnings multiple is nowhere near Cisco's at its peak. It's a key metric that helps investors determine if a stock is overvalued, undervalued, or fairly valued. Cisco was a lot frothier back then than NVIDIA is now. This is not ciscointhe.com era. Back then Cisco's go forward E multiple got to a peak of something like 136 X. Again, we're below the mean for the last five years. So even though the stock has done so well, it is still relatively cheap. Invidious fundamentals, they're also more sound than Cisco's in its heyday. As the Journal highlights, Invidious trailing 12 month revenue at the end of its last quarter more than tripled year over year and its operating margin has more than doubled in that time. Unlike the 90s when you had all these ancillary companies that were trading on eyeballs and 0 revenues and etcetera, etcetera, you don't have that today. These companies are extremely profitable. Their revenues up 100%, their EPS is 100%. I mean, they're outpacing the street by exponentially larger numbers. It's just impossible to keep up with what they're doing right now. And finally, NVIDIA might be more accurately called an ecosystem or an AI platform than a chip maker. It has an interconnected set of hardware, software and services that support AI applications. The ecosystem is hugely important, right? You have to remember these, these they do everything they do the chips, they do the hardware, they do the software, they do the networking, they do, they do everything there there isn't a single other company on on the planet that does everything like to the extent that they do everything that's around the the chip and it creates a tremendous amount of lock in all reasons that Nvidia's brand awareness is growing and anybody who holds any stock should know its name, which brings us to our last lesson. Say it with me NVIDIA.