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Published Aug 14, 2023

NVIDIA’s Valuation and AI’s Negative Sum Game — with Aswath Damodaran | Prof G Markets

Finance professor Aswath Damodaran delves into Nvidia's market valuation, the economic impact of AI, intriguing investment opportunities, and the evolving landscape of IPOs in 2023, providing critical insights for investors and market enthusiasts alike.
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Episode Highlights

  • Market Dynamics

    highlights the unpredictable nature of companies like Tesla, where the narrative can shift dramatically based on market conditions. He explains that while Tesla's potential in various markets is plausible, investing based on such expectations is risky. Similarly, Nvidia's future growth hinges on emerging markets that are not yet fully realized, making it a speculative investment.

    Investing on the expectation of it could happen seems not to me. A great way of investing, because you're just. Your best case scenario is you get your expectations delivered. Your worst case scenario is the company just exceptional, not awesome as you built in?

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    Damodaran also notes that Nvidia's reliance on TSMC for manufacturing adds a layer of risk, emphasizing the need for new, large markets for Nvidia to achieve significant growth 1.

       

    Market Entry

    Damodaran advises caution when considering current high-priced stocks, even if they are already in one's portfolio. He mentions that while these stocks are fully priced, there will be future opportunities to invest at more favorable prices. He suggests looking at sectors that have not yet recovered from the 2022 downturn for potential investment opportunities.

    I think that they are, in fact, fully priced right now, but I think there will be chances of those people who regret not buying them. There will be a chance again in the future.

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    Damodaran emphasizes the importance of timing and suggests focusing on undervalued sectors for the next market upswing 2.

       

    Investment Insights

    Damodaran discusses specific companies like Schwab and Moderna, highlighting their potential as long-term investments. He believes Schwab was unfairly lumped in with other troubled banks and sees it as a solid investment. For Moderna, he notes that while the post-COVID letdown is real, the company's mRNA technology could lead to future growth.

    I think Schwab is a good investment from that perspective, because I think it's a solid franchise. It's a franchise that I don't think is going to go away.

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    Damodaran suggests that Moderna's potential in new medications makes it a worthwhile consideration for investors with a long-term horizon 3.

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