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  • Writer's pictureJonathan Wilmot

What a Difference an AI Makes

Updated: Feb 28

Nvidia latest earnings report had more market impact than all of last week's busy macro calendar put together. Just one more sign that the world's demand for high end chips to power AI is insatiable at the moment, and that US companies more generally are far ahead of the rest of the world in commercialising AI.

For some, Nvidia's share price is already nuts and the AI frenzy already a bubble. But Nvidia's one year forward P/E ratio is now 30, below the average of 37.3 over the past 8 years. The big question is whether profit margins, currently huge can stay this high in the medium to long term.

Meanwhile, the turbo boost to US corporate profits as a whole from AI spending, and all the infrastructure that goes with it might suggest a period of well above trend earnings growth, despite the very high level of real earnings versus trend. So the case for earnings being above trend for a long time, or for a shift to a new level of isn't obviously pie in the sky.


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