NVIDIA: high expectations and fast growth
What happened when investors paid a very high price for expected growth, and the growth arrived much faster than most forecasts.
Last updated: September 2026
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The situation
NVIDIA designs chips called GPUs. They were first known for video games, and later also for data centers, where they are used to train and run artificial intelligence (AI) models. NVIDIA's ends in late January, so its fiscal year 2023 mostly covers calendar year 2022.
In fiscal 2023, demand for gaming chips dropped after the pandemic boom, and profit fell by more than half. At the same time, interest in AI grew quickly after ChatGPT was launched at the end of 2022, and investors began to expect a large increase in demand for NVIDIA's data center chips.
Because the share price rose while recent profit had fallen, the became very high in early 2023: investors were paying for profits they expected in the future, not the ones already reported.
The numbers
NVIDIA (NVDA), fiscal years 2022 to 2026
| Metric | FY2022 | FY2023 | FY2024 | FY2025 | FY2026 |
|---|---|---|---|---|---|
| Revenue | $26.9B | $27.0B | $60.9B | $130.5B | $215.9B |
| Revenue Growth | +61.4% | +0.2% | +126% | +114% | +65.5% |
| Net Income | $9.75B | $4.37B | $29.8B | $72.9B | $120.1B |
| Net Profit Margin | 36.2% | 16.2% | 48.8% | 55.8% | 55.6% |
| Free Cash Flow | $8.13B | $3.81B | $27.0B | $60.9B | $96.7B |
What the numbers showed
The expected growth arrived, and very quickly: revenue more than doubled in fiscal 2024 and again in fiscal 2025, and profit grew even faster. As earnings rose, the P/E came down from its very high level, even though the share price kept rising.
What was uncertain at the time
- Whether demand for AI chips would be as large, and last as long, as investors hoped.
- Whether competitors, or customers designing their own chips, would take part of the market.
- Whether rules limiting sales of advanced chips to some countries would hold back sales.
What this case shows
A high P/E means investors expect a lot. In this case the expectations were met and exceeded, but that could only be known afterwards. Many other companies with very high expectations did not deliver the growth investors hoped for, and their share prices fell. Similar numbers can come before very different outcomes, which is why valuation always involves uncertainty.