Conduct a detailed market analysis of a publicly traded company

A 15-prompt guide to give you a detailed and useful analysis

I love reading annual reports. As a consultant, I often need to become a quick study on a new business or sector, and annual reports are a nice cheat code for onboarding a lot of information in one (mostly) easy to consume document.

I’ve experimented with various prompts over the last two years to help me with this type of analysis, but my workflow was originally cumbersome. I’d source the annual report, upload it to ChatGPT and then run through my prompts. Nothing wrong with that, but I always felt I was missing the bigger picture.

No more.

With ChatGPT’s web search capabilities, I can see the larger picture, and get a thoughtful analysis in minutes.

The real value in these prompts comes from reading ChatGPTs answers and using this as a learning tool, less in a getting to a final output or report.

That said, here is what the summary analysis looks like when I have ChatGPT run through these new prompts (Paid subscribers can scroll to the bottom for a link to my entire chat with ChatGPT):

Final Summary of NVIDIA Corporation (NVDA)

Key Findings:

1. Market Leadership:

• NVIDIA dominates the AI chip and discrete GPU markets, holding approximately 70–90% and 88% market share, respectively.

• Its leadership in AI, gaming, and data centers positions it as a key beneficiary of transformative technology trends.

2. Financial Strength:

• Exceptional revenue growth (FY 2024: $60.92 billion) and robust profitability (net profit margin: 55.69%).

• Significant free cash flow generation, with projections exceeding $200 billion over the next two years, enabling R&D investments and strategic acquisitions.

3. Innovation and Ecosystem:

• Proprietary platforms like CUDA and Omniverse create high switching costs and foster a strong developer ecosystem.

• Product launches, such as the Blackwell AI chips, highlight NVIDIA’s commitment to staying at the forefront of technological advancements.

4. ESG Practices:

• High ESG scores and sustainability initiatives enhance NVIDIA’s appeal among socially conscious investors.

• Renewable energy use (76%) and energy-efficient product designs align with global environmental goals.

Potential Red Flags:

1. Valuation Concerns:

• High forward P/E ratio (~44x) raises questions about the sustainability of NVIDIA’s premium valuation.

• Recent price movements suggest overvaluation relative to growth expectations, leading to heightened volatility risks.

2. Regulatory and Geopolitical Risks:

• U.S. antitrust investigations into NVIDIA’s AI chip dominance and export restrictions to China pose regulatory challenges.

• Heavy reliance on U.S. and Chinese markets makes the company vulnerable to geopolitical tensions.

3. Competitive Threats:

• AMD, Intel, and emerging AI chipmakers are closing the technology gap, which could erode NVIDIA’s market share.

• Large customers like Google and Amazon developing in-house chips could reduce demand for NVIDIA’s solutions.

4. Supply Chain Vulnerabilities:

• Ongoing semiconductor shortages and potential disruptions in global supply chains could hinder NVIDIA’s ability to scale production.

Investment Potential:

Bull Case:

NVIDIA’s market leadership in AI and GPUs, coupled with robust financial performance and strong innovation, positions it as a long-term growth leader in transformative technology sectors. The company’s scale, network effects, and brand power support a compelling growth story.

Bear Case:

The high valuation leaves little room for error, and regulatory scrutiny combined with intensifying competition could temper growth. Geopolitical risks further add to the uncertainties surrounding NVIDIA’s future performance.

Valuation Range:

Fair Value Estimate:

Based on a discounted cash flow (DCF) model and peer comparisons, a fair value range for NVDA stock is $400–$520 per share.

Current Price Assessment:

With NVDA trading around $500–$520 (as of November 2024), the stock appears fully valued, leaning toward the higher end of its fair valuation range. This reflects optimism about NVIDIA’s long-term prospects but also embeds significant risk if growth expectations falter.

Overall Recommendation:

Long-Term Investors:

NVIDIA is a strong buy for investors seeking exposure to the AI revolution, provided they can tolerate short-term volatility and valuation risks.

Cautious Investors:

A “wait-and-watch” approach is advised, looking for a more favorable entry point during market corrections or broader tech sector pullbacks.

Growth-Oriented Portfolio Fit:

NVIDIA remains a core holding in portfolios focused on transformative technologies, though investors should monitor competitive and regulatory developments closely.

Here are the 15 prompts I use to conduct this analysis:

---

Provide company details and get a brief summary:

Replace the NVIDIA details with whichever company you’re analyzing. After that, you can use every prompt as is; no need to swap in company details.

TICKER=NVDA, COMPANY=NVIDIA Corporation, Provide a brief overview of COMPANY (TICKER), including its primary business model, key products or services, and position within the SECTOR industry.

Analyze financial statements:

Analyze COMPANY's financial statements for the past 5 years. Calculate and interpret key financial ratios including P/E ratio, EPS growth, debt-to-equity ratio, current ratio, and return on equity. Identify any notable trends or red flags.