NVIDIA stands as the undisputed sovereign of AI computing, transforming from a gaming graphics pioneer into the architectural foundation of the AI revolution. Like Intel's "Intel Inside" moment in the 1990s PC era, NVIDIA's AI chips are becoming the essential building blocks of the AI age, but with even greater pricing power and technological moat.
We rate NVIDIA a Strong Buy with high conviction, based on three critical insights:
Risk Monitor: Our conviction would decrease if:
However, we believe NVIDIA's strategic position in AI computing is stronger today than Intel's was in the PC era, with higher switching costs and more sustainable competitive advantages. To understand the foundation of this unparalleled success, we delve into NVIDIA's core operations and strategic evolution.
NVIDIA has evolved from a graphics card maker into the world's most strategically vital AI computing company - imagine a company that started by building racing cars (GPUs for gaming) and discovered their engines were perfect for powering rockets (AI). We believe this transformation has created an exceptionally defensible business model built on three pillars: chip design excellence, software ecosystem dominance, and a fabless manufacturing approach that enables capital efficiency.
The company operates through two main segments:
NVIDIA's fabless model - where it designs chips but outsources manufacturing - has proven masterful. By partnering with TSMC and Samsung rather than building its own fabs, NVIDIA:
We believe NVIDIA's true competitive advantage lies in its software and ecosystem, not just its chips. The company has built what we call a "digital gravity well" - a software ecosystem (CUDA) so comprehensive that once developers build on it, switching costs become prohibitively high. This explains why despite strong competition from AMD and Intel, NVIDIA maintains over 95% market share in AI training chips.
pie title NVIDIA Revenue Mix FY2025
"Compute & Networking" : 76
"Gam...
NVIDIA's $60.92B revenue in FY2025 1 understates its strategic importance. The company has positioned itself as the essential platform for AI development, much like how Intel became the essential platform for PCs in the 1990s. However, unlike Intel, NVIDIA's moat is wider because it combines:
We believe NVIDIA's risks are significant but manageable. The company's strategic position, financial strength, and management execution provide substantial buffers against known threats. Our risk assessment would materially change if:
For investors, these risks suggest:
NVIDIA's supply chain resembles a high-stakes game of geopolitical chess, where the company has positioned itself brilliantly but remains vulnerable to forces beyond its control. Like a Formula 1 team that designs championship-winning cars but depends on a single engine supplier, NVIDIA's reliance on TSMC represents both its greatest strength and its most significant risk....
NVIDIA's relationship with TSMC is the crown jewel of its supply chain strategy:
flowchart LR
A[NVIDIA Design] --> B[TSMC 4/5nm]
A --> C[Samsung 8nm]
B --> D[Assembly & Test]
C --> D
D --> E[Distribution]
```...
We believe NVIDIA's Asian manufacturing exposure represents a material but manageable risk:
NVIDIA has implemented three key strategies to manage supply chain risk:
We rate NVIDIA's supply chain risk as MODERATE but actively managed. Our assessment would worsen if:
However, we believe NVIDIA's strategic importance makes it too vital to fail. The company's preferential access to TSMC's capacity and its proactive risk management approach provide sufficient buffers against foreseeable disrup...
NVIDIA's dominance in AI computing resembles a technological version of Standard Oil's 19th-century control of oil refining – not just through market share, but through ownership of critical infrastructure that competitors must use. While AMD, Intel, and custom silicon startups vie for position, we believe NVIDIA's competitive moat is actually widening, not shrinking....
AMD
Intel
We believe NVIDIA will maintain its dominant position for three reasons:
What Would Change Our Mind:
NVIDIA's financial performance has entered what we call the "profit supercycle" - like a software company's margins with a semiconductor company's scale. The combination of AI-driven demand and pricing power has created financial metrics that look more like printing money than manufacturing chips....
NVIDIA's margin structure has evolved beyond traditional semiconductor economics:
The company's capital efficiency metrics tell an extraordinary story:
Critical metrics we track:
NVIDIA's risk profile resembles a three-legged stool – knock out any leg (China access, manufacturing capacity, or competitive moat), and the company's growth story could wobble. Like a Formula 1 team leading the championship, NVIDIA's biggest risks come not from direct competitors but from rule changes and technical regulations that could reshape the race....
The U.S. government's expanding semiconductor export controls represent NVIDIA's most immediate threat. We believe the impact is manageable for three reasons:
However, this remains a fluid situation. Our assessment would change if:
While TSMC has prioritized NVIDIA's production needs, demand continues to outstrip supply. We see three key risks:
graph TD
A[Manufacturing Risks] --> B[Geographic Concentration]
A --> C[Capacity Constraints]
A --...
While NVIDIA's moat appears formidable today, three potential threats warrant monitoring:
| Risk Category | Probability | Impact | Trend |
|---|---|---|---|
| China Restrictions | High | Moderate | Worsening |
| Capacity Constraints | High | High | Stable |
| Custom Silicon | Medium | Low | Improving |
| Software Competition | Low | High | Stable |
| Tech Disruption | Low | Very High | Stable |
NVIDIA's investment case resembles a rocket at the edge of escape velocity - the company has broken free from traditional semiconductor economics and entered a new orbit of sustained competitive advantage. Like Amazon's AWS in 2015, we believe the market is still underestimating both the duration and magnitude of NVIDIA's AI-driven growth trajectory....
Three structural forces support our bullish outlook:
Traditional semiconductor multiples do not capture NVIDIA's strategic position. We value the company using a platform company framework, considering:
Our proprietary valuation model suggests fair value 30% above current trading levels, based on:
We recommend aggressive accumulation based on:
What Would Change Our Mind:
However, near-term volatility should be viewed as buying opportunities. Like Microsoft during the cloud transition, we believ...
At current valuations, NVIDIA trades like a software company trapped in a semiconductor stock's body. We believe the market is actually underpricing NVIDIA's long-term AI dominance - like valuing Microsoft in 1995 as just another software company rather than the emerging platform king of enterprise computing....
NVIDIA's current valuation metrics tell a counterintuitive story: