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Nvidia’s critical weak point: Taiwan

Building more fabrication plants in other countries is not the solution for companies that require the highest tech chips

Nvidia’s share price hit a record high after its last set of earnings. In the current quarter, it expects revenues to rise by around 170 per cent on last year. At this rate, the stock’s previously steep valuation has started looking even cheaper than its peers. Yet in the days that followed, prices have fallen. The culprit may be Taiwan.

Sales growth has justified to Nvidia’s once pricey earnings multiple. Before the results, investors had faced repeated warnings that the shares, which traded at a valuation of 220 times trailing earnings, with a market value of more than $1tn were overvalued.

But following its earnings forecast the company trades at just 31 times forward earnings. This is the same level as much smaller peer Advanced Micro Devices.

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