NVIDIA

Nvidia is making money at a pace that is hard to believe. Revenue grew about 65 percent over the past year, and the company keeps roughly 55 cents of profit out of every single dollar it brings in. Most businesses are happy with 10 or 15 cents. On top of that, Nvidia signed a 100 billion dollar partnership with OpenAI, the maker of ChatGPT, to keep supplying chips for years. Real companies are spending real money because these chips are simply necessary.

Nvidia built something rivals cannot easily copy. Nearly all important AI software is designed to run on Nvidia chips through its system called CUDA. Switching away would be like rebuilding the internet from scratch. That lock-in helped push Nvidia's total value past 5 trillion dollars, making it one of the most valuable companies on earth. Even Google, Amazon, and Microsoft, who are building their own chips, still keep buying from Nvidia.

Almost all of Nvidia's money comes from a small group of giant customers like Microsoft, Google, and Amazon, and those same customers are spending billions trying to build their own chips to need Nvidia less. The new 100 billion dollar OpenAI partnership adds even more risk, because Nvidia is now leaning hard on one company that does not yet turn a profit. If even one major customer pulls back, Nvidia could lose billions in sales almost overnight.

The stock has run up so far that investors are paying around 60 dollars for every 1 dollar the company earns, far above what is normal. Nvidia is growing fast, but the price has climbed even faster, so it is priced for everything going right. Any stumble, like China restricting chip sales or that 65 percent growth rate cooling off, could send the stock falling hard. Some worry this looks like the dot-com bubble, where huge spending did not always pay off.