The building block diagram of chapter 4 isolates the market’s pricing of speculative growth for NVIDIA in June 2023. Here is the one for NVIDIA in February 2024 with a required return of 10% per year. The firm had a market capitalization at the end of February 2024 of $2.9 trillion. There is a lot of growth built into its per-share market price of $828.90. Indeed, the building-block diagram puts the market pricing of growth at 83.3% of price. Now there is a price to challenge! (Prices are before a 10-for-1 stock split in 2024, so the price here is $82.89 post-split)
By March 2025, NVIDIA’s stock had risen to $132.80 or $1,328 on a pre-split basis. The example comes with a warning: The market’s pricing of growth here looks excessive but beware of trading just on this: Challenge the growth pricing with a fundamental analysis. And, if you do not understand the business—the development of AI, the demand for AI chips, and the prospective competition for NVIDIA—then step away. Of course, you are free to gamble. (You can track what happened after March 2025).