NVIDIA CorporationNVDANASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $108.95 per share(market-calibrated)

-40.3%

Upside to Fair Value

Current

$182.48

Pure Model

$84.43

Fair Value

$108.95

Bull Case

$115.27

Bear Case

$57.65

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor NVDA

✓

CapEx already efficient

CapEx at 1.22% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 48.08% — below the sector mature average of 60.38%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $269.3B (48.08% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from -1.06% in Year 1 to -2.76% by Year 5 (per analyst consensus). That's below the 3.75% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $55.57/share (9.3x terminal FCF) while exit multiple gives $113.30/share (34.8x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $182.48. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 80.43% indicates efficient cash generation. FCF reaches $220.4B by Year 10 (39.34% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)2.31

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)14.91%

Cost of Debt

Pre-tax Cost of Debt2.21%

Tax Rate15.12%

After-tax Cost of Debt1.88%

Equity Weight (E/V)99.74%

Debt Weight (D/V)0.26%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (99.74% × 14.91%) + (0.26% × 1.88%)

= 14.88%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$213.7B	$469.1B	$529.6B	$521.0B	$560.1B
EBIT	$102.7B	$225.5B	$254.7B	$250.5B	$269.3B
Tax	$15.5B	$34.1B	$38.5B	$37.9B	$40.7B
NOPAT	$87.2B	$191.4B	$216.2B	$212.7B	$228.6B
+ Depreciation	$1.8B	$3.9B	$4.4B	$4.3B	$4.6B
- Capex	$2.6B	$5.7B	$6.5B	$6.3B	$6.8B
- Δ NWC	-$684M	$32.2B	-$4.5B	-$247M	$6.1B
Free Cash Flow	$87.1B	$157.4B	$218.6B	$210.9B	$220.4B
Discount Factor	0.870	0.660	0.500	0.379	0.250
Present Value	$75.8B	$103.8B	$109.3B	$79.9B	$55.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$220.4B

Terminal Growth Rate3.75%

WACC14.88%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$2.1T

PV of Terminal Value$513.1B

Exit Multiple Method

Year 10 EBITDA$274.0B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$7.7T

PV of Terminal Value$1.9T

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$838.3B

PV of Terminal Value$513.1B

Enterprise Value$1.4T

(-) Net Debt$807M

Equity Value$1.4T

Shares Outstanding24.3B

Price per Share$55.57

Exit Multiple Method

PV of Projected FCFs$838.3B

PV of Terminal Value$1.9T

Enterprise Value$2.8T

(-) Net Debt$807M

Equity Value$2.8T

Shares Outstanding24.3B

Price per Share$113.30

Pure Model Fair Value

$84.43

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
12.88%	$98.45	$99.23	$100.09	$101.06	$102.15
13.88%	$90.49	$91.08	$91.74	$92.46	$93.26
14.88%	$83.47	$83.93	$84.43	$84.98	$85.59
15.88%	$77.23	$77.60	$77.99	$78.42	$78.88
16.88%	$71.66	$71.95	$72.26	$72.59	$72.96

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$57.65

-68.4% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 2.89

Base Case

$84.43

-53.7% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 2.31

Bull Case

$115.27

-36.8% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.97

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-1.06%

Year 3 Revenue Growth29.65%

Year 5 Revenue Growth-2.76%

Year 7 Revenue Growth-0.16%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin48.08%

Terminal EBIT Margin60.38%

Tax Rate15.12%

Historical Capex / Rev1.22%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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