Episode summary
Dylan Jovine | Is NVIDIA Worth $22 Trillion? The Model That Shocked Wall Street
Summary
Dylan Jovine argues that NVIDIA could be worth $22 trillion, or roughly $800 to $1,000 a share, based on the UBS HOLT system. He says the model is not a retail gimmick but an institutional tool that uses CFROI, or cash flow return on investment, to estimate value by adjusting accounting profits for replacement costs rather than reported depreciation alone.
He explains CFROI as an extension of Warren Buffett’s owner earnings idea, with the goal of getting closer to the real economics of a business. In his view, that matters because accounting statements can distort capital intensity and hide how much it would actually cost to replace machinery, plants, or equipment over time. He says the method tends to work especially well for high-ROI, low-asset businesses.
Jovine says the HOLT model has a strong track record, pointing to its past warnings on Yahoo, Cisco, and Sun Microsystems during the dot-com era, as well as later calls on weaker SaaS names. The counterargument, he says, is that competitors including Google, Amazon, ARM, and AMD are moving into chips and could erode NVIDIA’s dominance, even if HOLT’s valuation proves directionally right.
Key takeaways
- Dylan Jovine says the UBS HOLT system implies NVIDIA is worth 400% more than its current price, or about $22 trillion.
- Jovine argues CFROI is meant to correct accounting distortions by using replacement costs instead of relying only on reported depreciation.
- He says the HOLT framework has a strong history of identifying deteriorating tech businesses, including Yahoo, Cisco, and Sun Microsystems.
- The bear case he highlights is that Google, Amazon, ARM, and AMD are all entering chips and could pressure NVIDIA’s moat.
- Jovine says if HOLT is right, NVIDIA would be cheaper than it has been in years and could be a screaming buy.
Notable quotes
“is Nvidia worth $22 trillion? $22 trillion, or about $1,000 a share, $800 to $1,000 a share”
“Yes, according to a very super sophisticated financial modeling tool called the HOLT system, the UBS HOLT system”
“It's using a system what we refer to as cash flow ROI, CFROI, cash flow return on investment”
“It predicted fading growth for Yahoo, famously, Cisco, Sun Microsystems”
“Google's now selling chips, Amazon's selling chips, ARM's selling chips, everybody's selling chips, obviously AMD”
How the episode opens
Good morning. This is Dylan Jovaneil behind the markets. Happy Monday.
Today's Monday, April 13th, and is Nvidia worth $22 trillion? $22 trillion, or about $1,000 a share, $800 to $1,000 a share. Is it worth that much?
Yes, according to a very super sophisticated financial modeling tool called the HOLT system, the UBS HOLT system, which is a tool only institutional investors get access to, and it is a serious tool. You learn about it on Wealthfront. It wasn't owned by UBS when I owned a firm.
But, this is really never loved a stock as much as Nvidia. And, you know, really, you say, "Is Nvidia shares worth 400% more than they're selling for today? And the HOLT system says, "Yes.
And what is really interesting is the HOLT system does something that real financial analysts spend a lot of time focused on. It's using a system what we refer to as cash flow ROI, CFROI, cash flow return on investment. And what that does is it takes Buffett's owner earnings concept.
Buffett always talked about you want to look at owner earnings as a business owner. Cash flow minus capital expenditures, and you come up with this owner earnings. The problem is, how do you really define capital spending or predict capital spending, really?
Well, you have to understand something about the machinery that a company puts out there, their big capital spending, and you got to understand a bit about how long it takes for that machinery to degrade. You think about Intel. Let's say Intel builds a $10 billion plant in 2015.
If it has to build another plant in 2026, it's going to cost a lot more. Another way to think about this, and this is something that I found very effective when I lectured at colleges, is think about it this way.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- nvidia valuation
- ubs holt model
- cfroi/owner earnings
- chip competition
- dot-com bubble company risk models
Companies and tickers mentioned
- NVDA
- UBS
- CSCO
- AMZN
- GOOGL
- GOOG
- AMD
- ARM
- Nvidia
- UBS
- Yahoo
- Cisco
- Sun Microsystems
- Amazon
- AMD
- ARM
Watch the episode
Watch “Dylan Jovine | Is NVIDIA Worth $22 Trillion? The Model That Shocked Wall Street” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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