Presented by Team 6: Chieh LIU, Christopher CALDARERI, Giang NGUYEN, Yang ZHENG

Overview and Executive Summary

Key Stats (2017) RECOMMENDATION: BUY DCF Valuation Multiples Valuation

PRICE TARGET: $281 $281
12% upside from current level of $251/share
$235

NVIDIA’S 3 YEAR GROWTH

40.6% Sales
Growth

35.1%
EBITDA Margin

Company Overview
Founded in NVIDIA is a diversified semiconductor company that offers products in four segments: Gaming, Professional Visualization, Data Center
1993 and Automotive. NVIDIA’s commitment to leadership and continued growth in AI & datacenter with its GPU processing capabilities
has enabled the company to develop industry-leading technology through significant investments in research and development ($13
billion to date) and by acquiring and incorporating new technologies into their platform to extend their product leadership in a
number of industries.
Business Overview and Operating Segments

NVIDIA Sales Growth NVIDIA Sales By Region

NVIDIA Growth and Profitability NVIDIA Revenue Breakdown by Category

 SWOT Analysis

Strengths Weaknesses

● Different GPU lines for market segments (strong product mix) ● Product mix aimed towards the high-end, losing ground in entry-level GPU’s
● Gaming (Nintendo Switch, E-Sports, Virtual Reality, SHIELD Tablet, Cloud) ● Competition growing and specifically targeting NVIDIA.
● Skilled workforce, patents, licensing, R&D ● Dependence on third parties and their technology for the manufacturing,
● Leadership in datacenter for AI and Machine Learning due to developer assembly and packaging of NVIDIA products
outreach, education programs, GPU architecture and Partnerships with ● Significant revenue from limited number of customers
industry leaders
● Leader in cryptocurrency mining (byproduct)
● Created a platform, not just a graphics card

Opportunities Threats

● Growth in datacenter: cloud computing, AI, machine learning. ● Intel partnership with AMD to combat NVIDIA’s leadership in AI
● Virtual Reality and Augmented Reality is in its infancy ● Qualcomm entering integrated graphics chip market (Snapdragon 845)
● Self-driving cars – partnerships with car manufacturers ● ASIC chips are said to be more efficient in bitcoin mining and AI than GPU’s
● Bitcoin and cryptocurrency mining will continue to drive sales as there are still ● Bitcoin becoming harder to mine and will eventually no longer be economical to
hundreds of billions of dollars’ worth available to mine use current GPU’s
● Implementing AI in different industries (healthcare, construction, retail, ● Slowing level of growth or decline in the PC industry, along with seasonality of
airplanes, etc.) sales, and slower demand for new technologies
● E-sports is in its infancy – professional sports organizations are now starting
to invest heavily.
Gaming Segment

Growth Drivers in Gaming

● Overall strong gaming market

○ Gaming industry $100 billion large
○ Blockbuster games
○ Growth of eSports expanding the overall industry
○ Nintendo Switch gaming console
● Diversified gaming GPU portfolio: high-end and early entrants
● Focus on developing a graphics platform, and not just a piece
of hardware, through developer support
● Cryptocurrency mining

Going forward

● Virtual Reality opportunities

● Cryptocurrency and underlying Blockchain technology
Professional Visualization Segment

Growth Drivers in Pro Visualization

● Strength across several key industries including defense,

manufacturing, energy and healthcare.
● Among key customers, high end quality products are being
used by GlaxoSmithKline for AI and by Pemex Oil and Gas for
seismic processing and visualization.
● Steady growth is expected for the forecasted five years

Pro Visualization

● NVIDIA’s Quadro GPU’s are created for professional designers

to enhance productivity and simulate reality.
● NVIDIA works closely with software vendors to ensure software
compatibility for clients in the design and manufacturing fields,
where 3d modeling for cars, architectural walkthroughs and
surgical training is required, and for digital content creation
such as video editing and special effects.
 Automotive
($ Million)
Automotive Financial Performance: Auto Revenue, Annually
8,000.0

ü Looking out to 2023, we assume a steady revenue growth. 7,000.0 Forecast

ü Infotainment system, historical revenue generator
6,000.0
slowdown: revenue In 2017, deceleration growth to 14.6% Deceleration from a
y/y. 5,000.0
3-uear CAGR of 80%
to 40% through 2023.
4,000.0
Upsides
3,000.0
ü High- end infotainment system (AI) take off: NVIDIA apply
2,000.0
multiple models of AI.
ü Drive Xavier, autonomous machine processor, customer 1,000.0
available on this quarter (2018).
--
ü Leadership, first position in AI self- driving platform. 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E
ü Numbers of partnership with several automaker for AI Source: company data, forecast
autonomous system.
ü Baidu, VW, Aurora, Mercedes- Benz ( MBUX)
ü NVIDIA DRIVE: First safe AI self-driving platform.
ü 50% more companies and institutions using NVIDIA DRIVE
platform.
 Datacenter
($ Million)
Datacenter Financial Performance: 70,000.0
Datacenter Revenue, Annually
ü Data center revenue:
Forecast
-Tesla GPUs for accelerated computing/ GRID for delivery graphic rich 60,000.0

application/ DGX, super computer. Deceleration from a

ü Increased 105% y/y, record $606 million, strong sales. 50,000.0
3-uear CAGR of 110%
ü Looking out to 2023, we assume a booming revenue growth. to 90% through 2023.

40,000.0
Upside

ü Tesla V100 GPU : continue ramp up for cloud provider, 30,000.0

Alibaba, Amazon, Baidu, Google, IBM, Microsoft.

ü High- end infotainment system (AI) take off: NVIDIA apply 20,000.0

multiple models of AI.

ü Volta architecture: 10 times faster deep learning system 10,000.0
ü Datacenter benefited from booming growth: high
performance computing and development of AI.
--
ü Partnership to advance AI from: transportation, 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E

manufacturing medical and health. Source: company data, forecast

Market Multiples Valuation

COMPARABLES
 Multiple valuation
Comparable peers: high growth and high margin US based 90.0.0% LTM Total Revenues, 1 Yr Growth % 2020 Expected growth
80.0.0%
corporations in the semiconductor industry 70.0.0%
60.0.0%
Company Comp Set 50.0.0%
Company Name Market Capitalization Total LTM Total LTM EBITDA LTM Net Debt 5 Year Beta
40.0.0%
Enterprise Revenue (mm) (mm)
Value 30.0.0%
Lam Research 36,280 33,786 9,558 2,901 (2,493.6) 1.44
QUALCOMM 88,999 76,442 22,360 6,144 (12,557.0) 1.36 20.0.0% 12.8%
7.4% 5.9% 5.5%
Applied Materials 63,283 61,134 15,463 4,686 (2,149.0) 1.57 10.0.0%
Micron Tech 69,992 72,881 23,155 12,902 2,889.0 1.44
0.8% 0.0%
Broadcom 109,577 115,921 17,636 7,524 6,344.0 0.86 .0.0%
NVIDIA 150,488 145,385 9,714 3,409 (5,103.0) 1.41 (10.0.0%)

om
s
ch

ch
M

IA
ial

Te
ar

ID
M

dc
er
se

CO
(20.0.0%)

NV
on
at

oa
Re

M
AL

icr

Br
m

ed
QU

M
La

pl i
Ap
LTM Total Revenue (mm) LTM EBITDA (mm)
25000.0
LTM EBITDA Margin % 2020 Expected EBITDA margin
20000.0 60.0.0%

50.0.0%
15000.0
40.0.0%
10000.0 30.0.0%

20.0.0%
5000.0
10.0.0%
- .0.0%
…

…
ed

om
ch

ch
M

IA

om
ch

ed

ch
M

IA
Te
ar

pl i

ID
M

dc

Te
ar

pl i

ID
M
se

CO

dc
NV
Ap

on

oa

se

NV
CO

Ap
Re

on

oa
AL

icr

Re
Br

AL

icr

Br
m

QU

m
La

QU

M
La
Multiple valuation
35.0.00x
TEV/Forward EBITDA 31.4 x
30.0.00x
NVIDIA Share price implied from trading multiples
25.0.00x NTM Forward P/E

20.0.00x TEV/Forward EBITDA

TEV/Forward Revenue
15.0.00x
10.1 x 10.9 x
9.4 x 9.4 x
10.0.00x
4.1 x P/E LTM
5.0.00x
TEV/EBIT LTM
.0.00x
TEV/EBITDA LTM
…
ed

om
ch

ch
M

IA
Te
ar

pl i

ID
M

dc

TEV/ Revenues LTM

se

CO

NV
Ap

on

oa
Re

AL

icr

Br
m

QU

M
La

14.0.00x
TEV/Forward Revenue
11.8 x 0 50 100 150 200 250 300 350
12.0.00x
Serie 1 Min - Median range Median - Max Range
10.0.00x

8.0.00x Company Comp Set Forward Multiple

Company Name TEV/Total Revenues TEV/EBITDA LTM TEV/EBIT LTM P/E LTM TEV/Forward TEV/Forward NTM Forward
6.0.00x 5.5 x LTM Revenue EBITDA P/E
Lam Research 3.5x 11.6x 13.1x 24.5x 2.97x 9.37x 13.19x
4.0.00x 3.5 x 3.4 x QUALCOMM 3.4x 12.4x 16.4x - 3.48x 10.05x 17.73x
3.0 x Applied Materials 4.0x 13.0x 14.4x 22.6x 3.40x 10.94x 13.27x
2.5 x
Micron Tech 3.1x 5.6x 8.4x 9.3x 2.50x 4.10x 5.74x
2.0.00x Broadcom 6.6x 15.4x 41.6x 64.7x 5.49x 9.37x 13.07x
NVIDIA 15.0x 42.6x 45.3x 51.6x 11.75x 31.41x 36.31x
.0.00x
Min 3.1x 5.6x 8.4x 9.3x 2.5x 4.1x 5.7x
…
ch

ed

ch

om
M

IA

Median 3.5x 12.4x 14.4x 23.6x 3.4x 9.4x 13.2x

Te
ar

pl i

ID
M

dc
se

Max 6.6x 15.4x 41.6x 64.7x 5.5x 10.9x 17.7x

CO

NV
Ap

on

oa
Re

AL

icr

Br
m

QU

M
La
DCF Valuation

Main Assumptions Growth Drivers

● Gaming revenues more than doubled from 2016 to 2017 ● Automotive and autonomous cars will continue to grow,
and are more than 50% of total revenues. regardless of the temporary setbacks (Recent victim of
a Uber self-driving car)
● E-Sports is beginning to accelerate and this will continue
to drive sales of NVIDIA GeForce graphics cards
● Datacenter and Artificial Intelligence in enterprise
● NVDA will continue to see the benefits of cryptocurrency solutions will continue to drive growth for the
popularity by being a leading force. foreseeable future

WACC Final Price Target

● Cost of debt: 3.83%
● Marginal Tax Rate: 21%
● Enterprise Value = $165 Billion
● Beta: 1.41
● Net Debt = $(5.1 Billion)
● Market Risk Premium: 5.08%
● Equity Value = $170.5 Billion
● T-Bond 10 Years: 2.84%
● Shares Outstanding = 605 Million
● % Debt in Capital Structure: 1.3%
● % Equity in Capital Structure: 98.7%
Share Price = $281
WACC: 9.92%
Price Target: $281

Thank You