$NVDA · The Motley Fool · 2026-11-09

Which reminds me of another great company. This is not a small company at all. This is Nvidia. This is a company worth about 5 trillion dollars today. A company that no one has heard of before.

Yes. Those who know the name Nvidia If you haven't heard, let me tell you, they make chips. They make chips and they make a lot of them.

The most amazing thing about Nvidia is, as I said, it's a $5 trillion company, but its forward earnings are close to 17 or 17.5 times.

Unlike other companies, which have negative free cash flow and very high capital expenditure (CapEx). In fact, the reason for the decrease in cash flow and the increase in capital expenditure is that they are all pouring money into companies like Nvidia to buy their chips.

The interesting thing about Nvidia is that despite being a $5 trillion company, their expected revenue growth rate for this fiscal year is 90.6 percent. A $5 trillion company is making such a huge amount of revenue and that revenue is growing at a rate of 90.6%.

The interesting thing is, right now analysts do n't think Nvidia will or can grow as fast as they expect in the next fiscal year. So, Nvidia has already entered their fiscal year 2027, which for us is the next fiscal year and the next.

Calendar year. The market is currently expecting Nvidia to grow 68.2%, whereas Nvidia itself said a quarter ago that they expected to grow at least 70%.

So, at least 70%—it could be a lot more if they get a lot of supply. And as I said, it's a very profitable company because its margins are pretty high and demand is pretty high.

Of course, there's a lot more competition in the market now than there was a few years ago , right? For example, a lot of companies are now going to Broadcom or Marvell to make their own custom chips .

Amazon has its own custom chips , Google has TPU, and OpenAI and Anthropic. You have AMD. Everyone is coming out with their own chips , but the demand is still so high that all the cloud providers will always offer Nvidia solutions, because Nvidia's ecosystem is the biggest.

But, I know there's a big discrepancy here. We talked about Apple in another video because Apple is traded at a high price, because it has a lot of free It generates cash flow and it's a predictable safe investment.

But, if you look at Nvidia's margin profile, its profit profile, and the future cash flow of the company. For example, in the fiscal year that they're in now, they're expecting to generate $190 billion in free cash flow.

And after two years, they're expecting to generate $450 billion in free cash flow. That's possible in just one year. So, it's hard to go against this company, especially at the current valuation.

Of course, if after two years the growth slows down significantly, then the growth rate will also slow down, then maybe the premium should not be paid for this business. But it's not like this business is currently trading at a very high price.

So, I still see Nvidia as one of the big bets and a sure winner in this AI world , no matter what happens.

First, because they've established themselves as the best player and the number one. And second, they can generate a lot of cash . So, they've continued to pay dividends , they've also been buying back shares.

And if If necessary, they will buy or invest in other companies, as we've seen in the last two years.

Yeah, and I want to mention one last thing. I mean, it's easy to think that Nvidia's revenue is completely dependent on big tech companies and some other names. But one of the fastest growing areas of their revenue is national governments, the sovereign AI side.

That's a sector that's going to grow to about $40 billion in fiscal year 2026. That's three times the size of last year.

So, you have Canada, France, Japan, Singapore, India, and many other countries. These are all major countries that are building their own government AI data centers to ensure their national security and information sovereignty.

And these sovereign activities are directly tied to defense and state infrastructure budgets . So, it's not tied to the profit cycle of commercial technology. So there's a buffer here to protect against the volatile costs of corporate technology.

And that continues to be a key driver of Nvidia's growth.

I hope that over time Sovereign AI will become a huge part of their total revenue.

And if we go back to Nvidia's own unique advantage . When developers build custom enterprise AI models, they use Nvidia's own CUDA language and their unique architecture. And once it's in the tech stack , you can't easily change it .

This lock-in to software is real. And that's why Nvidia is able to convert a large portion of their revenue into cash flow . They look a lot like a hardware business. And of course that's very important .

But the enterprise software ecosystem is an integral part of their growth story, which is easy to overlook in our discussions. So I wanted to bring that up as well.