Nvidia leans into the danger of a bad-news spiral

Nvidia reported on August 26 that its second-quarter revenue roughly doubled year-over-year to $96 billion.

As of Wednesday's close, the chipmaker's shares have risen by around 12% so far this year, while rival AMD's have more than doubled.

Investors, though, have been somewhat reserved. When the market closed on Wednesday, Nvidia’s enterprise was valued at 43 times its trailing four quarters of free cash flow. That compares to rivals like Broadcom AVGO.O at 53 times and AMD AMD.O at 96 times, implying a meaningful discount.

AMD, in particular, is expected to grow quickly, with Wall Street estimating it will nearly triple cash generation next year, according to Visible Alpha. Yet Nvidia’s anticipated growth at far larger scale is hardly less impressive. One creeping issue is that both established rivals like Broadcom and in-house silicon like OpenAI’s newly unveiled “Jalapeno” are poised to take an increasing piece of the AI pie. But Huang is also adding further risks.