NVIDIA's Sales Multiple: A Bet on Margins

NVIDIA (NVDA) has seen its stock price fluctuate in recent years, but what drives this volatility? The answer lies not in the earnings multiple, which appears ordinary at first glance, but in the sales multiple.

The company's revenue growth is a key factor in its premium valuation. In fiscal Q1 2027, NVIDIA reported $82 billion in revenue, an 85% year-over-year increase. The breakdown of this growth shows that hyperscale buyers accounted for about half of data center revenue, growing 12% sequentially, while the AI-cloud, industrial, and enterprise group grew 31%.

The varied set of buyers is now driving faster growth, with Blackwell systems accounting for most of what ships. However, this margin is an operations problem, and NVIDIA's total supply, including inventory purchase commitments and prepaids, was raised to $145 billion.

There are concerns that the next generation, Vera Rubin, may not meet expectations, and the outlook carries no China data center compute revenue, leaving an open question: is this revenue additional or work moved off NVIDIA's own GPUs?