Asymmetric Investing by Travis Hoium on $NVDA (Nov 5, 2026)
Nvidia's trailing 23 P/E after 83% growth looks cheap but rests on record ~75% gross and ~65% operating margins; historically gross was ~50% and operating 15-20%. If operating margin fell to 20%, the P/E would be ~65-70 and the stock expensive amid slow growth and margin pressure; negative 2028 revenue growth would likely add pricing pressure.
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So, if you look at some of the big companies, like Broadcom, AMD, Nvidia, Intel. For example, if you are Alphabet, you will make more TPUs and buy fewer Nvidia chips. So, this could be one reason for the decline in the price of a company like Nvidia.
Now, I want to use Nvidia as an example here, because they are one of the largest companies in the world and there could be some pressure on them in the next few years that investors are thinking about today.
As you know, Nvidia has achieved extraordinary results in the last few years.
Let's look at Nvidia's growth rate. As you can see, there has been 83% growth in the last year. What I often hear from investors is, you know, it's profitable to buy Nvidia shares because its price-to-earnings multiple is so low.
But when you analyze what price-to-earnings multiples are being determined based on —which is true everywhere in the tech industry and the current AI trade —you see that stocks that look cheap may not actually be cheap.
Because it is based on traditional past data , not the future. So I 100% agree that Nvidia stock looks cheap on a trailing basis, especially for a company that has grown so rapidly.
But I want to put these things in historical context, because Nvidia hasn't always achieved very high rates of consistent growth. To be honest, the company's growth rate in the last few years is much higher than in the last 15 years.
So, I've taken this data back to 2010. You can see that Nvidia's revenue growth is sometimes negative.
So, what will happen to Nvidia stock if revenue growth is negative in 2028 ? In that case, the stock's multiple will probably decrease slightly. This means you will likely face pricing pressure.
Let's discuss those margins. Because I think investors are most concerned about this issue right now. You have a 23 price-to-earnings multiple, but that's looking at the highest margin in Nvidia's history.
So, the current gross margin is about 75%, and the operating margin is about 65%. Historically, I look back as far as possible. Let's go back to 2005. Historically, gross margins have typically been around 50%. They increased it to 60% in 2022.
So, what happens if this margin drops by 15 percentage points ? More importantly, historically, Nvidia's operating margin has occasionally been negative, but it has typically been in the 15 to 20 percent range.
So, if the 65% margin drops to 20% , the price-to-earnings multiple of 23 that seemed cheap will suddenly become more like 65 or 70. Then it will seem quite expensive. At the same time, your stock is growing slowly and margins are under pressure.