NVIDIA: valuing an AI infrastructure business

Excel model available. Version 1.2 · Valuation date: 2026-09-04.

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Start with one piece of the business

Choose one disclosed business or revenue category. Write down who pays, what they receive, and what has to happen before the company can recognise revenue and collect cash. Keep customer spending plans separate from revenue already earned.

Three things to work through

Demand that becomes revenue

Ask: How much growth depends on customers continuing to expand, finance, and bring computing capacity into service?

Find: Disclosed revenue categories, customer concentration, receivables, and management commentary on demand and deployment timing.

Then decide: Test slower customer spending and delayed deployments. Do not convert a broad AI spending forecast directly into company revenue.

Margins through a product transition

Ask: What changes as new chips, systems, and networking products replace the current mix?

Find: Gross-margin bridges, product-transition disclosures, inventory provisions, and disclosed supply or market-access constraints.

Then decide: Separate a temporary transition cost from a lasting change in economics. Test both lower revenue and lower margins rather than extending a strong quarter indefinitely.

Cash committed before the sale

Ask: What cash or commitments are needed to secure supply and support growth, and how much remains if demand slows?

Find: Inventory, supplier prepayments, purchase commitments, receivables, capital spending, and the cash-flow statement.

Then decide: A business can depend on external manufacturing and still carry substantial inventory and supply risk. Include those obligations in the downside.

Where the valuation can go wrong

Separate operating profit from gains or losses on investments. Reconcile investments and other non-operating assets in the enterprise-to-equity bridge without counting them twice. Do not invent standalone software revenue or profit to justify a software multiple; use the economics actually disclosed. A DCF needs a defensible path from rapid growth to a sustainable long-term business.

Apply Mike’s judgment

Scarcity can justify deeper investigation, but it does not remove the price ceiling. Write down the evidence supporting the growth case, what would weaken it, and whether the business can withstand the downside. Keep conviction in the capability separate from willingness to pay any price.

Write down what must be true for the price to make sense. Test lower revenue and lower margins together, including financing and required investment. Keep buyer-created synergies separate from the business’s standalone value.

Open the workbook and try one change

1. Read Start Here, then open Valuation Summary to see the range of methods.
2. Review Assumptions and Sources & Adjustments. Separate reported figures from assumptions before changing the case.
3. Change one operating assumption, then test lower revenue and lower margins together. Follow the effect through Operating Forecast, DCF, and Sensitivities.
4. Read Checks after each change. Resolve a failed check or funding shortfall before relying on the result.

Use KPIs & SBC to connect growth to margins, stock compensation, and cash. In DCF, test a slower growth path and the long-term margin together. Keep supply commitments visible and separate operating value from investment assets.

Compare the answers

Use Trading Comps and DCF to compare market pricing with the cash the business can generate. The Transactions and Sum-of-the-Parts sheets add perspectives where the inputs support them; read their assumptions before treating the outputs as evidence. Acquisition Returns is a buyer-affordability exercise, with its own financing and return assumptions.

Check enterprise value (the operating business) separately from equity value (what remains for shareholders after the relevant cash, debt, and other adjustments). If methods disagree, identify the assumption causing the gap before choosing a range.

Choose a valuation method

Copy this assumption note

• Assumption that matters: ___
• Evidence supporting it: ___
• What is still unknown: ___
• What changes in the downside: ___
• Effect on cash, price, or the handover: ___
• Next evidence to obtain and owner: ___

Carry the finding into the deal

Before You Buy: Follow the Work helps test the operating assumptions. After the Deal: Keep the Business Working helps assign the changes and protect continuity.