The isolation of the market’s pricing of growth is the difference between the market price and the (no-growth) price based on “what we know.” It thus represents what we don’t know and that’s good to recognize. We might bring further information (in the fundamental analysis that follows in the book) to try to explain the speculative pricing of growth, but the starting point is to appreciate that this is something we may not have a good grasp on.
So, with the $690.88 pricing of growth for NVIDIA on this webpage, we might quickly come to the conclusion that we don’t know much about the future evolution of AI robots, and other new technologies that will create the demand for NVIDIA’s computer chips, so we walk away: Others probably have a comparative advantage. For us, it is a pure speculative play, and the value investor eschews speculation (though feel free to take the bet!). Of course, if we do have information to challenge the pricing, we might proceed to reach a conclusion of over or underpricing with some confidence.