NVIDIA is the poster child of the AI revolution, with its stock price soaring amid unprecedented demand for its GPUs. At a closing price of $143 (assumed June 9, 2025), is NVIDIA a bargain or overhyped? To find out, I applied two valuation methods—Warren Buffett’s Discounted Cash Flow (DCF) model and the McGrew Valuation model—using NVIDIA’s financial data to estimate its intrinsic value. The results reveal a dramatic split, offering critical insights for investors. Let’s dive in.
Methodology and Data
I used NVIDIA’s quarterly financials from provided datasets, aggregating Free Cash Flow (FCF) into annual figures for fiscal years 2021–2025 (NVIDIA’s fiscal year ends in January). The FCF data is:
- FY 2021: $4.694 billion
- FY 2022: $8.132 billion
- FY 2023: $3.808 billion
- FY 2024: $27.021 billion
- FY 2025: $60.853 billion (three quarters plus one estimated)
Shares outstanding as of April 30, 2025, are 24.39 billion. The closing price of $143 is assumed but unverified due to no real-time data access. Both models calculate a 3-5 year FCF Compound Annual Growth Rate (CAGR), using an 8% discount rate and a 2.5% perpetual growth rate for terminal value.
Buffett Valuation: The Conservative Path
The Buffett model uses the last three years of FCF (FY 2023–2025), yielding a 3-year CAGR of 299.6%. As a growth stock (CAGR > 10%), it caps growth at 10% for Years 1–10 to stay conservative. Starting with FY 2025 FCF of $60.853 billion, Year 10 FCF reaches $157.845 billion. The terminal value, calculated as Year 10 FCF × (1 + 2.5%) / (8% – 2.5%), is $2.94 trillion.
Discounting these cash flows to present value gives a total intrinsic value of $2.186 trillion. Dividing by 24.39 billion shares results in an intrinsic value per share of $89.65. With a 25% margin of safety, the buy price is $67.24. At $143, NVIDIA is 59.5% above this value, earning an Overvalued status (>36% above intrinsic value).
McGrew Valuation: Betting on AI Dominance
The McGrew model uses five years of FCF (FY 2021–2025), calculating a 5-year CAGR of 89.66%. For growth stocks, it starts with this 89.66% growth rate in Year 1, declining linearly to 10% by Year 7 over six years, then holding at 10% for Years 7–10. From $60.853 billion, Year 1 FCF surges to $115.424 billion, reaching $1.007 trillion by Year 10. The terminal value is $18.758 trillion.
Discounted to present value, the total intrinsic value is $11.082 trillion, or $454.47 per share. With a 25% margin of safety, the buy price is $340.85. At $143, NVIDIA is 68.5% below this value, making it a Screaming Buy (≥25% below intrinsic value).
Valuation Results
The table below summarizes the findings:
| Stock Ticker | Valuation Method | Intrinsic Value per Share | Price with 25% Margin of Safety | Last Closing Price | Valuation Status |
|---|---|---|---|---|---|
| NVDA | Buffett Valuation | $89.65 | $67.24 | $143 | Overvalued |
| NVDA | McGrew Valuation | $454.47 | $340.85 | $143 | Screaming Buy |
Why the Stark Contrast?
The Buffett model’s 10% growth cap reflects Warren Buffett’s cautious philosophy, assuming NVIDIA’s explosive FCF growth (89.66% CAGR) will normalize. This conservative approach yields a modest intrinsic value, suggesting NVIDIA’s current price is unsustainable. The McGrew model, however, embraces NVIDIA’s 89.66% CAGR, projecting aggressive growth fueled by its AI, gaming, and data center dominance. By starting with this high growth rate and only gradually declining, McGrew’s model amplifies the intrinsic value, banking on NVIDIA’s continued market leadership.
Limitations and Risks
The analysis relies on provided data, with FY 2025 FCF partially estimated, which may affect accuracy. The $143 closing price needs verification, as real-time data wasn’t accessible. NVIDIA’s FCF volatility (e.g., negative quarters in FY 2023) and sky-high CAGR introduce risk—if growth slows, McGrew’s optimistic projections could falter. Conversely, Buffett’s conservatism may undervalue NVIDIA’s disruptive potential in AI-driven markets.
Investor Takeaways
The Buffett model urges caution, labeling NVIDIA overvalued at $143 and suggesting a wait for a dip below $67.24. The McGrew model sees a golden opportunity, with NVIDIA trading far below its $340.85 safety price. Your choice depends on your risk appetite: Are you a Buffett-style value investor seeking safety, or a McGrew optimist betting on NVIDIA’s AI-fueled future? The truth likely lies in balancing these perspectives. Share your thoughts in the comments!
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