Nvidia Shares Are Actually Cheaper Than They Were Before ChatGPT. Here's Why.

Core Insights - Nvidia's net income has grown by 4,591% since the launch of ChatGPT, while its share price has increased by 11,208%, indicating a significant disparity between earnings growth and stock price appreciation [1][7]. - The company's price-to-earnings (P/E) ratio is currently more than 34% lower than it was at the time of ChatGPT's debut, suggesting that shares may be undervalued [4][6]. - Nvidia's substantial share buyback programs, totaling $110 billion, have contributed to the increase in earnings per share by reducing the share count, which is not reflected in the dollar amount of earnings growth [8]. Financial Performance - Nvidia reported a net income of $39.1 billion in its most recent quarter, a significant increase from $680 million reported in the quarter before ChatGPT's release [6][7]. - The company achieved a year-over-year earnings growth of 65.3% last quarter, which, if sustained, could allow Nvidia to align its earnings with its current P/E ratio [10]. Market Position - Nvidia's current market capitalization stands at $4.5 trillion, with shares trading at 46 times earnings, indicating a premium valuation compared to historical tech stock valuations [9]. - Despite the high P/E ratio, Nvidia's growth trajectory and recent earnings surprises suggest that the company may still have considerable upside potential [10].