Nvidia's response to the Kyber delay claim

On July 5, the semiconductor and artificial intelligence (AI) analysis company SemiAnalysis issued a statement suggesting that Nvidia (NVDA 3.05%) could be facing a more than one-year delay in an important product launch.

The chipmaker was quick to respond, and the stock price has climbed since CEO Jensen Huang’s company issued a statement that pushed back against those claims.

Nvidia’s response to the Kyber delay claim

The reporting suggested Nvidia’s Kyber rack architecture, which is designed to pack 144 of the company’s GPUs into a single server so that they can work as one powerful system, was experiencing delays that would push its launch out to 2028.

Nvidia responded, telling Yahoo! Finance that the roadmap for Kyber was still “intact,” which would put its launch window in the second half of 2027. The market appeared to absorb the initial news without any major fallout for the stock price. Shares of Nvidia opened at $194.42 on July 6 and closed at $210.96 on July 10. The chipmaker maintains its position as the world’s most valuable publicly traded company by market cap.

During the period when the talk of a potential Kyber delay was circulating, however, another surprise was unfolding.

The challenges of being successful

Nvidia has been the face of the AI trade; as of this writing, the stock price is up more than 900% over the past five years. But even as the chipmaker keeps beating expectations in its quarterly earnings reports, the bar has been set so high from its previous successes that it’s becoming increasingly difficult for it to impress the markets.

Nvidia recently traded at a forward price-to-earnings (P/E) ratio of 22.2; the last time its forward P/E was around that level was in June 2019.

At first glance, that seems like a disconnect. Unlike in 2019, there is now an active race to win AI, with companies spending hundreds of billions of dollars each year on AI infrastructure.

Nvidia is generating more revenue than it ever has before, and demand for its wares is not slowing down. Yet its future earnings are still being valued at roughly the same level on a medium-term basis as they were in 2019. There is, however, a valid reason why the markets are becoming less bullish on Nvidia.

What the market is saying

Nvidia is clearly a dominant player in the AI hardware space, but what the market is asking now is, how much future growth is there left for it to capture? The forward P/E isn’t so much a knock on Nvidia’s operations, but rather a question of how much bigger the world’s largest company can get.

As all AI roads still mostly run through Nvidia, it’s a company that can still reward long-term shareholders. The caveat, however, is that investors should keep their expectations reasonable. As of the start of this month, the entire value of the U.S. stock market was about $75 trillion. 
Nvidia’s market cap is now about $5 trillion. If it were to climb by another 900% (as it did over the last five years), it would be worth $50 trillion. That would be an unreasonable share of the economy for any company to hold, showing why maintaining rapid growth from here will be far more of a challenge than it previously was.