Schwab Network on $NVDA (Nov 2, 2026)
NVDA trades at about 14 or 15 times next-12-month expected earnings, down almost half over eighteen months, as investors price data-center capex peaking in 2027. The speaker disagrees: growth should drive data-center spending well beyond 2027. NVDA can spend half its free cash flow on buybacks and dividends, and demand exceeds supply even with new chips as rental prices remain extremely high.
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I'm thinking, for example, of a company like Nvidia. Nvidia shares are now trading at about 14 or 15 times the expected earnings over the next 12 months. This rate, as you know, has fallen by almost half over the past eighteen months.
Nvidia's stock is trading as if capital spending on data centers will most likely peak in 2027.
But my basic view is better than that. I think growth will continue to drive spending on building data centers, you know, well beyond the end of 2027. But yes, investors are quickly pricing in slowing growth, and perhaps even reaching a final peak.
We see Nvidia already doing that. Nvidia has stated that it will spend half of its free cash flow on share buybacks and dividends going forward, but most other major technology companies are not in a position to do so these days because they are spending all of their free cash flow on building data centers.
This shows you that demand is exceeding supply even with the arrival of new Nvidia chips, as you know, over the past two months. Rental prices have remained extremely high. So, this is another important indicator as well.
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