Breaking Down Nvidia's Future: Valuation and Market Share Analysis

I wanted to share some thoughts on Nvidia (NVDA) and how I'm looking at valuation now. Based on my assumptions, I estimate the fair value around $438 per share.

Here are my key assumptions:

• 14.5% cost of capital

• 5% long-term growth

• 40% free cash flow margin

• 50% CAGR for AI chips through 2027

• Nvidia maintaining 80% market share

That gets me to $438 in my DCF model. But there are upside and downside risks around competition.

On the upside, I only assumed 50% AI growth for data center/HPC through 2027. If gaming, pro visual, and auto business expand AI adoption, that could push NVDA higher. A 5% terminal growth rate may also be conservative given just the data center.

The key downside risk is if terminal growth falls to 3% after 2027, that would create a 43% downside.

Given the balanced risk-reward now, I see NVDA as a hold around $438. Let me know if you have a different take!