Data centre revenue as a share of total has gone from 40% to roughly 88% in three years. Everything about Nvidia's multiple is explained by that single chart.
Nvidia's valuation since 2023 is not a story about semiconductors. It is a story about business mix. In fiscal 2022, data centre revenue was roughly 40% of total. In fiscal 2025, it was closer to 88%. Every part of the re-rating since, from 20x earnings to 35x earnings and back down to roughly 28x on the last pullback, can be traced to that mix-shift.
We think the cleanest way to understand the stock is to look at five charts. They tell you everything the company is, everything the multiple is pricing, and where the debate is.
A three-year move from 40% to 88% data-centre mix is unprecedented in semiconductor history. It is what happens when a single end-market (AI training and inference) scales from zero to roughly $220 billion of addressable hardware spend in 36 months, and one vendor holds 80%+ share.
The consequence for valuation: Nvidia moved from being valued as a cyclical gaming and pro-graphics business to being valued as a data-centre infrastructure platform. Those two multiples are roughly 4x apart. The majority of the stock's 9x move from 2022 to peak 2024 was that multiple shift, not raw earnings growth.
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A 75% gross margin for a hardware business is a software business dressed in silicon. That margin profile is the core justification for the 28x earnings multiple. If the margin compresses by 500 basis points, every 100bps of compression removes roughly 2x from the fair multiple. At 65% gross margin, Nvidia looks like a premium semi at 22x. At 75%, it looks like infrastructure software at 28 to 32x.
The debate is whether customer concentration and custom-silicon encroachment (Trainium, TPU, MTIA) compress the margin. Our view: Blackwell's compute density holds the margin through 2026. Rubin in 2027 is the next test.
Of the $410 billion 2026 hyperscaler capex estimate, roughly 50% flows to compute hardware. Nvidia's share of the compute budget is roughly 70%. That implies $140 billion of direct revenue from the top-four hyperscalers alone in 2026. On consensus of $190 to $200 billion total revenue, that is more than two-thirds of the company. Customer concentration has never been higher and never been more obvious.
The forward multiple has done the real work in the stock's return. From 19x in 2022 to 42x at peak is a 2.2x multiple expansion. Every forward return hinges on where the multiple settles. Our base case: 26 to 30x is the sustainable range as long as data-centre gross margin holds above 72% and hyperscaler capex continues to grow double digits.
Operating margin at 62% is why a 28x multiple can be defended. It is also the most fragile part of the story. The last time a semiconductor company held above 60% operating margin for more than three years was Intel in the late 1990s, and even Intel gave it back over the subsequent decade. Historically, extraordinary margins revert faster than extraordinary growth.
Sum of the charts: data-centre mix at 88%, gross margin at 75%, hyperscaler capex growing double digits, multiple at 28x, operating margin at 62%. Our fair value on 2026 earnings estimates of $7.25 a share at a 28x multiple is $203. The bull case at 32x is $232. The bear case at 22x is $160.
We are buyers below $180 and sellers above $230. The central debate is whether the margin profile holds through the next product cycle. We think it does. That is the trade.
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