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NVDA – Market expectations are for record-high Uniform ROA, but management may be concerned about the data center business, VMware, and gaming

June 24, 2021

  • NVIDIA Corporation (NVDA:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 48.9x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about the data center business, their VMware partnership, and gaming business growth
  • Specifically, management may be overstating the capabilities of their cloud data centers, AI growth opportunities, and the necessity of ray tracing for game developers. Additionally, they may lack confidence in their ability to execute their strategies with VMware and continue addressing the needs of data center customers. Furthermore, management may be exaggerating the potential of the Enterprise Software business, Omniverse, and the RTX 30 Series GPUs. Moreover, they may lack confidence in their ability to sustain gaming business growth and continue innovating for target industries. Finally, management may have concerns about gross margin declines, the quantum computing industry outlook, and the sustainability of crypto mining tailwinds