---
title: "A Third Time Up the Roller Coaster"
description: "NVIDIA's P/E ratio and revenue growth show a consistent pattern across three booms: gaming, crypto, and AI. The correlation between valuation and growth tells us where we are in the cycle."
date: 2026-01-15
lastmod: 2026-08-05
canonical_url: https://www.tomtunguz.com/nvidia-pe-predicts-growth/
author: "Tomasz Tunguz"
---


AI is NVIDIA's third climb up a steep slope.

First came gaming in the late 2010s.

Then cryptocurrency.

Now artificial intelligence.

Each wave pushed revenue growth above 50% & with it, P/E[^1] ratios surged. P/E ratios rose before the revenue growth materialized.

{{< email_image src="waxfzqesannkaeekiavd" alt="nvidia_pe_chart" width="540" height="304" >}}

There's a four-quarter offset between P/E ratio & TTM[^2] revenue growth. When you shift revenue growth forward by a year, the correlation with P/E jumps to 0.80.

Investors buy stocks based on where they think the company is headed, not where it's been. A high P/E today reflects expectations of strong revenue growth tomorrow. During NVIDIA's climb up each wave, P/E & future growth move in lockstep.

But look at what happens at the peaks.

{{< email_image src="yohqcuquhmlhdyu8lpkv" alt="nvidia_rolling_correlation" width="540" height="304" >}}

At the end of each boom, the correlation collapses, falling to zero or even turning negative. P/E stays elevated while revenue growth plummets. The market is slow to reprice.

This is the pattern : during the ascent, P/E & growth are tightly linked. At the peak, they decouple. High P/E persists as growth dissipates.

Today's AI wave is riding the same mesa. The correlation remains above historical levels. The rapid pace of deal-making & explosive rates of inference growth suggest this roller coaster ride will continue.

[^1]: P/E : price-to-earnings ratio
[^2]: TTM : trailing twelve months