Will NVIDIA crash like Tesla?

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$NVIDIA Corp(NVDA)$ 's stock price has surged 249% in the past 12 months, but that's also sparked concerns in the market that this AI stock might be overvalued, and there's even fear of a $Tesla Motors(TSLA)$ -style crash looming.

After all, Tesla's share price fell 30% in 2024 due to slowing demand for electric cars and sliding gross margins.So, could Nvidia be headed for the same fate as Tesla?

Let's dig into it from three perspectives:

The Difference

While car sales still make up the majority of Tesla's revenue, analysts are now paying more attention to the company's autonomous driving platform, as well as its self-developed AI chips, software, and robotics decisions.

On the other hand, Nvidia's core business is AI chips, primarily targeted at data centers, with cars only accounting for a small fraction of its income. No matter how the future of full self-driving looks, Nvidia can still thrive with its data center business.

Business & Financial Results

Nvidia's revenue exploded 126% to $61 billion in fiscal 2024, with net income jumping 581% to $31 billion, fueling its stock price surge.

Compare that to Tesla, whose car deliveries grew 38%, but revenue only increased 19% to $97 billion in 2023, with gross margins sliding from 26% to 18%. That profit margin decline could drag down Tesla's growth momentum.

Valuation

With its stock price soaring, Nvidia's price-to-sales ratio has jumped to around 37, indicating that investors are super bullish on the stock. In contrast, Tesla's current price-to-sales ratio is only 6, higher than its all-time low of less than 2 in 2019 but still the lowest since 2020.

Even though Tesla's share price has fallen, its trailing P/E ratio is still a whopping 54 due to the concurrent decline in profits and profit margins, while Nvidia's is only 37.

After all, earnings have a more direct impact on a public company than revenue, so Nvidia still holds an edge over Tesla in terms of valuation.