Nvidia Could Be the First $22 Trillion Stock, According to 1 Top Analyst. But There's a Big Catch.

However, 1 apical expert believes that Nvidia should beryllium valued overmuch higher. UBS' (NYSE: UBS) John Talbott pegs the company's valuation astatine a whopping $22 trillion. That's not a projection for 5 oregon 10 years successful the future, by the way; it's what the UBS Holt exemplary assesses Nvidia's existent valuation astatine right now.

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If Talbott and his squad are right, Nvidia should beryllium the world's archetypal $22 trillion stock. But there's a large catch.

The HOLT exemplary was primitively developed successful the 1970s and was bought by Credit Suisse successful 2002. When UBS acquired Credit Suisse successful 2023, it added the instrumentality to its merchandise lineup. At its core, HOLT is simply a discounted currency travel (DCF) model. It doesn't trust connected net multiples oregon analysts' terms targets. Instead, the exemplary uses currency travel instrumentality connected concern (CFROI). UBS believes that CFROI amended reflects companies' underlying economics than different metrics.

The mean CFROI for non-financial companies is 6%. Nvidia's is 73%. This level ranks the GPU shaper successful the apical 0.1% of each the companies the HOLT exemplary has ever tracked. HOLT besides looks astatine plus growth. Nvidia's plus maturation puts it successful the apical 0.5% of each companies ever tracked successful its database.

Nvidia besides stands retired connected different cardinal front. HOLT factors successful expected slice successful returns for companies. The exemplary assumes that contention volition yet statesman to impact a company's maturation trajectory. However, the instrumentality slice projected for Nvidia hasn't materialized. As a result, HOLT had to summation its semipermanent instrumentality expectations for the company.

Based connected each of its underlying data, HOLT calculated Nvidia's valuation astatine $22 trillion. Talbott acknowledged that galore investors are skeptical astir this sky-high number. However, Nvidia's CFROI is simply phenomenal. Talbott told The Information, "We've ne'er seen thing similar this successful our system--it's incredible."

The combined marketplace headdress of each the companies successful the S&P 500 (SNPINDEX: ^GSPC) is astir $62 trillion close now. Is Nvidia truly worthy much than one-third of this magnitude by itself? I don't deliberation so.