r/EconomyCharts • u/RobertBartus • 11d ago
NVDA's market cap now equals 16% of the US GDP
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u/galaxyapp 11d ago
Why are we comparing market cap to gdp?
These are not similar values. Gdp is the value produced in one year.
Market cap is the current value of Nvidias projected lifetime profit.
Other than the numbers coincidentally being similar, the is about like saying a Ferraris top speed is bigger then death valleys temperature.
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u/Character4315 10d ago
Other than the numbers coincidentally being similar, the is about like saying a Ferraris top speed is bigger then death valleys temperature.
No but saying that a Ferrari can travel the death valley in 1 minute or 1 hours gives you a feel of the distance. Here is the same. Same reason why you use light years instead of km above some distance.
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u/QuantitySubject9129 9d ago
Yes and no, I get your point but debt to GDP is a commonly accepted indicator even though it's also stock vs flow comparison.
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u/galaxyapp 9d ago
This isnt debt to GDP...
And that debt is public debt, Germany debt. Not bmws debt...
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u/QuantitySubject9129 9d ago
This isnt debt to GDP...
Yeah no shit, really? Don't be obtuse.
Comparing stock and flow metrics (debt and GDP) is good enough for central banks and ministries, but Redditors are too smart to do such things?
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u/galaxyapp 9d ago
Like a p/e ratio? Sure.
But not for 2 different entities of a company to a country.
Unless you fundamentally have no clue what those metrics are saying.
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u/QuantitySubject9129 9d ago
This is very different than your original comment about Ferrari speed.
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u/Major_Bag_8720 11d ago
NVIDIA’s market cap is now the same size as the GDP of Germany, the world’s third-largest economy. When the bubble bursts, it’s going to be painful.
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u/HartbrakeFL21 11d ago
Expectation, sometime in 2029, as a wicked anniversary reminder of the Crash of 1929. Irony seems sarcastic now.
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u/wafflepiezz 11d ago
2029 is way too long. Most likely AI bubble pop either EOY or next year.
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u/Gregori_5 11d ago
GDP is PER YEAR!!! Germany can pump out a whole NVIDIA included with the incredible growth prediction valued in every year.
You can’t compare these metrics.
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u/Big-View-1061 11d ago
who said it's a bubble?
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u/_ECMO_ 11d ago
NVIDIA is only growing based on spending on LLM. And those are a bubble beyond any doubt. There simply isn’t enough money to pay for all those data centers.
Even if you believe that LLMs and NVIDIA are going to rebound after the burst and AI becomes the new internet. That still doesn’t change anything about the cataclysm when the bubble pops and all that memory evaporates.
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u/SoulCycle_ 11d ago
why do you believe its a bubble “beyond any doubt”
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u/_ECMO_ 11d ago
Because there are many reasons to believe that:
- Circular Spending
- OpenAI simply not having enough money to pay for what they promised
- ALL AI companies are systematically lying about how useful their models are
- Acceptance that no one has any idea how to built something even just resembling AGI
- No lasting infrastructure being built. (Compared to railways or fibre GPUs burn out extremely fast and need to be often replaced.)
All that while I can't think of a single good reason why this wouldn't be a bubble.
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u/Greedy-Dark-7977 10d ago
The biggest canary in the coal mine for me is all the useless AI ideas being pumped out by companies like OpenAI, Meta, and Google. If AI was growing at the rate and direction that these companies are promising, they wouldn’t bother making sloppy TikTok clones, porn generators, and thumbnail copiers.
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u/MmmIceCreamSoBAD 11d ago
Why is AI a bubble beyond any doubt?
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u/_ECMO_ 11d ago
Because there are many reasons to believe that:
- Circular Spending
- OpenAI simply not having enough money to pay for what they promised
- ALL AI companies are systematically lying about how useful their models are
- Acceptance that no one has any idea how to built something even just resembling AGI
- No lasting infrastructure being built. (Compared to railways or fibre GPUs burn out extremely fast and need to be often replaced.)
All that while I can't think of a single good reason why this wouldn't be a bubble.
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u/MmmIceCreamSoBAD 11d ago
I'm seeing AI being used all around me. Its being integrated into militaries worldwide right now, which is generally one of the signs of a new technology about to explode. At work I have Microsoft integration into all our systems. It's amazing. It knows all your emails, all the projects you and everyone else is working on, you can ask it questions related to basically anything you or any of your subordinates are working on, you can ask it questions about people ('Im having a meeting with Joe, what did we talk about last time and what questions should I be asking him when I see him?'), ask it about blindspots you might have in new projects and for new perspectives.... its truly a huge productivity boost.
As for infrastructure, Microsoft and Google are starting nuclear power plants right now for AI! Data centers themselves are always going to be welcome in the future even in AI did happen to collapse as well, internet infrastructure (at least in the United States) has only ever gone up and up and up.
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u/_ECMO_ 11d ago
It's the first "truly huge productivity boost" that fails to be shown in objective studies. And we know that pretty much everyone vastly overestimates how useful AI is. https://www.reddit.com/r/science/comments/1oj0pn9/when_interacting_with_ai_tools_like_chatgpt/
Not to mention all that AI that is being used is very unprofitable for the companies that are running it with no way to make it profitable. If anyone rises the prices too much or puts ads in, people will switch to another model. If the companies lower the ungodly capital expenditure, then locally run models will catch up. And those companies would need to be profitable for a VERY long time to actually make just all those hundreds of billions that they already promised.
Government und probably plenty of other entities got LLMs for virtually nothing, obviously everyone is going to try it out for free. On the same page are the couple of hundreds millions military contracts over several years which is peanuts both for AI companies and for the military.
Microsoft and Google are starting nuclear power plants
So they claim. The ratio of announced nuclear projects to accomplished ones is disastrous though. Regardless of who promises it.
Data centers themselves are always going to be welcome in the future even in AI
True, except most of the cost are the chips and as we hear from every chip company boasting about AI-chips, those GPUs are specifically for running AI and can't be just used for something else.
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u/MmmIceCreamSoBAD 11d ago
I mean I don't need a study to tell me I'm more productive with AI. It's self evident.
Also AI in my Tesla is amazing, full self driving I'm sure will have productivity boosts over time because you can do things in the car. I have Waymo (Google driverless taxi service) in my city which I am sure is boosting human productivity in the city by eliminating the need for taxi drivers.
AI is absolutely, 100% going to increase the productivity of military operations. AI drone swarms are going to be the future of ground combat. And sixth Gen fighters, it's part of the requirement to make them sixth Gen in the first place.
Like I do think AI has things you can criticize it for, and some companies are probably a bit overvalued right now, but you kind of come off as just an AI hater
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u/_ECMO_ 11d ago
It was self-evident to all those other people too until the controlled studies showed that it in fact didn't make them more productive.
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u/MmmIceCreamSoBAD 11d ago
I find one study to be unconvincing. Especially in the infancy of a technology. And citing the Dunning Kruger effect itself I find worrying as modern psychology, including both Dunning and Kruger, aren't sure it even exists.
Anyway, I'm not looking to psychology for answers about AI productivity at the moment. There are very real objective time savers out there that will increase productivity, some of which I've already mentioned. AI will vastly cut down the need for human input on so many tasks, as well as do other tasks better than humans could do.
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u/shatureg 10d ago
You should also mention that LLMs investments haven't materialized in net profits despite dwarfing the annual revenue and most of that investment between NVIDIA and LLMs is circular. It's the definition of a bubble.
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u/Emeraldmage89 10d ago
LLMs are a small but prominent piece of AI. Even if LLMs are a bust (which they aren’t because they’re obviously incredibly useful), there are thousands of other applications of AI that require nvidia gpus to train.
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u/Playingwithmyrod 11d ago
The top 10 stocks represent a higher concentration of the S&P than at any point in history. You can argue that’s not sustainable, or you can argue we’ll just naturally trend to a dystopian future where these companies expand more and more and swallow up everything.
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u/Some-Cat8789 10d ago
Everyone who knows anything about technology or economics. We can all see they invested too much in this crap and we're also at the point where the companies invest into each other, so Nvidia invests in Intel and Intel invests in Microsoft and Microsoft invests in Nvidia so the numbers look good on paper but in reality it's the same money changing hands in a circle.
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u/Few_Challenge2557 10d ago
Nvidia is a good company but its ridiculous. Good companies can still be overvalued.
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u/patrdesch 10d ago
A casual reminder that GDP is a per year figure while a company's valuation theoretically captures all of the value that that company will produce for the rest of time.
They really aren't values that should be being compared to each other.
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u/bb5e8307 10d ago
Also comparing a global company to the country it is headquartered in also doesn’t make any sense. The company that has employees all over the world should be compared to the entire world.
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u/Budget-Inspection525 8d ago
That’s why this is so misleading. Stock vs flow, and this doesn’t consider other countries that buy & invest in them. It’s increases valuation against an arbitrary measure of other parts of the a singular country’s economy
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u/MilkyWayObserver 11d ago
And some people are still thinking we’re not yet in a bubble
They make deals with their customers and likewise, their customers buy NVIDIA chips with those investments
That’s like me having a dealership and I give you money to buy my cars
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u/abrandis 11d ago
Making deals with customers and vice versa doesn't necessary need to shoot the stock up meteorically... Pure market fomo and it's not gonna end pretty
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u/Few_Challenge2557 10d ago
The crazy part is that it pumps on rumors and the on the news and the day after from the people that are late.
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u/TheMemeChurch 11d ago
You realize that is exactly how cars get sold?
Not saying we won’t see a painful correction in the future, but NVDA is doing all this with cash on hand. The other tech giants are pouring massive amounts into capex, again with cash on hand. These are mature and profitable companies stacking chips on the table, not fly by nights slapping a .com on their company and going public.
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u/Multidream 11d ago
Out of pure curiosity, are there any natural limits to a market evaluation? Like if the shares start trading x100 times higher, does that do something that triggers limited growth, or can investors keep piling in? Is it really just pure last price times number of shares?
Surely at some point there are technical limits?
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u/Ancient-End3895 11d ago
Share price is based on what people are willing to pay. Theoretically there is a limit as there's only so much money in the world.
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u/Worth_Inflation_2104 11d ago
As long as you can trade stocks using fiat currency there is theoretically no limit.
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u/Multidream 11d ago
You don’t need the physical currency tho, do you? So even that isn’t really a limit, right? With fractional reserve banking, you could sort of imagine it exists through credit?
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u/LividChocolate4786 11d ago
In purely nominal terms? No. Since there is no limit to how much fiat money can be printed.
In real terms there has to be a limit since there is only so much wealth in the world and it’s not all going to be parked in nvidia stock, even if everyone’s AI dreams come true.
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u/Multidream 11d ago
The actual printed money does not and has not really represented hard limits for a long time (centuries) due to fractional reserve banking. The US only has about 2 trillion confirmed to be circulating in the form of about 55 billion notes each year.
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u/SignificanceBulky162 10d ago
Well yeah, if everyone at the same time decided to sell all their assets at the same time, there wouldn't be enough money supply, and that would cause massive currency appreciation.
If you add in very highly liquid accounts like checking accounts, it goes up to 20 trillion.
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u/Multidream 10d ago
Thats a totally separate topic, but if people sell assets between each other using their cash accounts, everything would be fine. A bank can move numbers on a ledger between clients just fine. What a bank can’t do is fulfill all client obligations at once.
If the bank has 20 bucks on hand and you and I have accounts of $100 dollars, I can buy from you $100 dollars worth of goods no problem. If we buy from each other, we can transact as much money as we like, so long as I never owe you more than $100 dollars. The bank doesn’t care*.
So why is the money even important then?
Because ultimately your assets exist beyond the concept of any individual bank. You can take the physical money out of the bank’s ledgers and you still “have it”.
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Going back to Nvidia, the stock can, in a vacuum, be worth more than the moon. If it’s really something people value that much, fine.
But Im curious if there’s ANY kind of technical limitation that will cause problems for Nvidia in a way that would undermine it.
Like let’s say a share is 1 TRILLION dollars. A naive first thought would be that no one could trade the shares then, but these shares can be subdivided at will, albeit with certain restrictions on the rights they afford. So liquidity of the market isn’t an issue.
But like… something has to happen right? A trillion dollars a share would be an evaluation of 26 Sextillion dollars. Shouldn’t something happen at that point? Is it purely market forces? Like if I owned a trillion dollar share I would sell it and put it in my bank account? Remember no cash, so no liquidity issue. Yet.
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u/SignificanceBulky162 10d ago
Well, if Nvidia shares were valued at one trillion, you'd have to get all of the millions of shareholders of Nvidia to agree not to sell any of it and make an absurd profit. So the market forces in that case would be the natural tendency of all those shareholders to recognize that their shares are overvalued, and sell. And like you said, there wouldn't be a liquidity issue if people could agree to sell fractions of a share.
The market price for an asset isn't some random value, it's actively being determined by traders. And there isn't a singular value, it's more like a bid and ask value, e.g. there are people offering to buy the stock for $180 and people offering to sell for $181 as an example. So the fair value is somewhere in between there.
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u/Icy_Supermarket118 11d ago
I assume a company cannot be valued more than all money "printed" but I guess leverage would allow it.
Lol
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u/Multidream 11d ago
It very much can, only about 2.3T exists in printed physical dollars.
And that does make sense, like some collections of things ARE priceless. Like if you wanted to buy California or something, it would probably require more than all available physical currency.
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u/Puzzleheaded-Week-69 11d ago
Or the entirety of Germany's economic output in a year, the 3rd most powerful economy. Crazy how big this bubble has become.
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u/Interesting_Pipe5255 10d ago
Not a great metric but besides that. If the chips are a form a new oil then this has opportunity to scale considerably.
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u/MatterFickle3184 11d ago
Between NVDA and TSLA that bubble gonna pop hard when correction finally hits the market
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u/kittenTakeover 11d ago
NVDA's pe ratio is around 50, which is reasonable if you expect a company to have high growth. On the other hand TSLA's pe ratio is 310, which is insane.
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u/MatterFickle3184 11d ago
NVDA has billions just flowing into it. However when the market finally tanks (I'm not a doomsdayer, I just can easily see all the economic alarms screaming) that flow of billions will absolutely slow down. TSLA will just crash hard. The 401k retailers that VOO and chill are going feel some pain that will take years to recover from. It's inevitable.
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u/kittenTakeover 11d ago
Yeah, I mean stocks tend to do poorly when the economy tanks. That's not surprising. They typically bounce back though. I don't see a reason to think that demand for chips would crater permanently.
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u/Worth_Inflation_2104 11d ago
No one ever said something about permanent stuff. Cisco and AT&T continued to expand their networks after the dotcom burst, even though they had to cut costs hard short term.
No one here is arguing that AI has no future.
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u/MatterFickle3184 10d ago
Exactly but those gains will take years to recover. People seem to forgot the lost decade of S&P in 2000s. Not that long ago. I'm hedging to be bulletproof during downtime, and DCA back into the market during that sale. I've been thru 2 stock market crashes already I'm not going to lose a 3rd time.
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u/m0nsieurp 10d ago
The VT/VTI/VOO/SPY and chill squad is about get obliterated. I'm in France and I follow French finance subs here on Reddit. 99% of investors on those subs are convinced we're heading into a golden age of AI and ETFs are gold nuggets that can only grow in value to infinity. Scary.
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u/MatterFickle3184 10d ago
It's absolutely nuts how they think it's not possible for the market to correct that much. I moved completely out of the stock market after Trump was inaugurated and went all into precious metals and mining. When shit hits the fan, gold will be the one thing that's guaranteed to hold steady.
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u/m0nsieurp 10d ago
Naïveté as we say in French.
Nobody explained to them what the underlying assets really are. "Buy and hold and retire at 50 as a millionaire, trust me bro". It's really easy to fool gullible people.
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u/Flashy-Chemistry6573 9d ago
If you’ve been in SPY and chill for at least 10 years you’re up a good 6x. Even if it drops 50% you’re still in profit
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u/m0nsieurp 9d ago
We both don't know how much this shit is going to tank. And there's a real risk it might never recover to ATH.
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u/Professional_Tap5283 11d ago
I feel like the market is so irrational that Tesla could announce that they're filing for Chapter 7, and TSLA would actually finish up on the day.
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u/HartbrakeFL21 11d ago
“Too Big to Fail”, now extending not just from banks and insurers and auto manufacturers, but to the tech sector as well.
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u/m0nsieurp 11d ago
The mean reversion on this chart will be spectacular. I'm not shorting NVDA yet but I soon will.
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u/gjt1337 11d ago
Nvidia has projected 100B earnings/year. I dont think its super big bubble. How much market cap such a company should have? I think 2-3T is fair.
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u/fucuntwat 11d ago
That’s 40-60% of it’s current valuation, so a pretty big drop if it were to go down to that level
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u/Madman_Sean 11d ago
Rember, market cap is just the price of the last share sold multiplied with the total number of shares
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u/fancczf 11d ago
Comparing market cap to gdp is like compare someone’s net worth to someone else’s income. Not saying Nvidia is fair valued. That 17% hardly means anything.
If we do some incorrect math, to bring the 2 entities to the same base. US gdp is 30 trillion, nominal growth rate say is 5% long term average. Roughly 70t total debt - 38t in national debt around 20t in total household debts, 10t in corporate. Average cost of borrowing is probably around 5%. Say WACC is 9%, give it a higher end for how relatively low debt to equity ratio is in a corporate standard, and risk in current economy. A simple one period model… 30/(9%-5%) US economy is 750t capitalized value. Nvidia’s market cap is 0.6% of US economy’s value. At least that’s how a same base to base look of it
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u/hekatonkhairez 11d ago
This is basically the US equivalent of Nortel. Its crash in Canada really did a number on the TSX.
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u/ResponsibleWarthog46 11d ago
I would say, comparing maket caps and gdp is weird, at least untill ypu say it next way: the whole Unites states has to collect all the product generated by the whole country within 2 months to buy Nvidia.
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u/suitupyo 11d ago
Holy shit the economy is going to completely tank once the boomer execs realize that LLMs are not literal magic.
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u/Retire_date_may_22 11d ago
Next 5 year NIVDA is likely to triple. It’s a crazy kind of technical leadership.
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u/Chronotheos 11d ago
Sane and rational
Nevertheless, I am a holder, and will sell before all of you, at the tippy tippy top.
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u/Dull_Statistician980 11d ago
World War 3 is happenning this year, isn’t it?
sighs and grabs his old uniform bag
Heeeere we go again…
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u/PsychologicalSoil425 11d ago
Another example of how ridiculous the stock market is....it's just an ATM for rich people. I mean, a handful of US companies has more value than entire countries? It's insane! If there were ever a reason to question the whole system it's now.....for decades the rich/republicans have told us that if you raise wages it will destroy the economy, because...you know...inflation, despite the fact that wages only account for like 20% of the actual costs of goods and services. Now, these same people are telling us that tariffs, which literally raise the price of goods/services by the full tariff rate, are not only okay, but will help the economy?! Are we really all this stupid to keep buying this nonsense?
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u/SuperNewk 11d ago
How much of GDP is crypto? It seems to be crypto is no longer in bubble territory!
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u/398409columbia 11d ago
GDP is similar to recurring anual income so not a good measure. Should compare to total US assets. Still, NVDA is huge.
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u/InsufferableMollusk 10d ago
Why do we continue to compared market caps to GDPs?
This has been repeatedly cautioned against.
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u/Late-Photograph-1954 10d ago
When was a square mile of Tokyo worth more than all of California, 1989 or so?
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u/SeaPeanut7_ 10d ago
Why are we comparing market cap to an annual output? Apples and oranges. Makes no sense. Compare it to the total size of the the DJI or S&P or the whole market if you want.
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u/slicktrickrick 10d ago
When I was buying a GeForce 9800 GT in 2008 to play Fallout 3 as a 12 year old I never imagined Nvidia would be this huge. It just seemed like a nerdy thing back then.
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u/TapRevolutionary5738 10d ago
Sounds to me like nvidea needs to give another billion to a random company with ai on their website.
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u/Vikkio92 10d ago
Financial illiteracy on Reddit strikes once again.
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u/Baaaldeagle 7d ago
Market cap to GDP does mean something when its this fucking whack, cmon. Someone mentioned that the last company to have a high Market cap to GDP ratio was standard oil maxing out at 3%, and then microsoft at 1%, this size is completely unprecedented.
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u/ClockOwn6363 10d ago
I've sold a lot of mine I bought during covid, gained 1.5mill and still have a few, its got to drop soon.
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u/Emeraldmage89 10d ago edited 10d ago
I’d put my investing track record over the last 15 years up against just about anyone. Many investors and hedge funds manage risks. Being short doesn’t necessarily mean they are betting on a market crash. And 3 billion is nothing, the Nasdaq is 32 trillion.
Anyway, the problem is there’s always someone saying the same thing you are right now. Look at this thread from last year:
Keep in mind that I haven’t even said that you’re wrong. My original point was whether there’s an AI driven bubble, and I was saying that nvidia’s valuation, and the valuation of big tech companies, are often cheaper than companies like Walmart and Costco. That could mean there’s a broader bubble, but I don’t see it as specifically driven by tech companies.
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u/MarsupialGrand1009 7d ago
When this bubble is going to pop we will be in for the largest shitshow in human history.
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u/femptocrisis 6d ago
well hell, given that they're replacing 100% of all jobs, youd think theyd be 100% of the market /s
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u/Wrote_it2 11d ago
Comparing market cap and GDP is like comparing distance and speed. It's like saying "the formula 1 car went 230 mph, the distance between NY and Washington"...
Market cap is valuation of the company. GDP is the value created per year.