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Sharing results of our algo scoring for business quality. The algo scores 40 measures across profitability, growth, cash flow and financial strength, using 10 years of data and ranking companies against sector peers. However, eight measures of valuation and dividends are excluded to focus purely on quality, so essentially the results are based on 32 metrics.

These are today’s results with default weights. Returns, margins and cash flow get maximum weights in the default settings followed by top line growth, operational efficiency, leverage etc.

The absolute score is based on 10 years of financial data for 32 financial metrics
Peer score is based on comparing the stock with its sector peers for the same metrics
Overall score is calculated by combining absolute and peer scores (70:30) though this weight can be changed.

Two sectors (consumer cyclical and utilities) are excluded. Note that as valuation is not considered, some overvalued stocks are in the list.

Which one do you agree or disagree with? Are you surprised by any of the stocks selected by the algo?

I use this list as a starting point for further analysis, not as a buy list. It's not an investment advice. DYOR.

This dividend algo works in two stages. First it filters, then it ranks what's left.

• The filters: minimum yield 2%, maximum payout ratio 70%, at least 3 consecutive years of increases, and the dividend has to be covered by free cash flow (see screenshot).
• The ranking weights four things: growth 35%, sustainability/safety 30%, yield 20%, consistency 15% (see screenshot). Growth is the multi-year dividend growth rate, not earnings growth. Sustainability combines the payout ratio, free cash flow coverage, and financial strength (current ratio, debt to equity, interest cover). Yield targets a 2-6% band rather than the highest number, so a 9% yield scores worse than a 3% one. Consistency is the streak of consecutive increases.

Sharing today's results for large caps and including all sectors. 73 companies pass. It's a starting point for research, not a buy list.

Which ones do you agree or disagree with? Surprised by anything the algo picked? Which ones wouldn't you consider dividend stocks?

Not investment advice. The author and Stockoscope may hold positions in the securities mentioned. Always do your own research.

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My algo scores 40 measures across profitability, growth, cash flow and financial strength, using 10 years of data and ranking companies against sector peers. However, eight valuation and dividend measures are excluded to focus purely on quality, so the results are based on 32 metrics.

These are today's results for large caps with default weights. Returns, margins and cash flow get the highest weights in the default settings, followed by top-line growth, operational efficiency, and leverage (see screenshot).

Three sectors (consumer cyclical, utilities and energy) are excluded. Note that as valuation is not considered, some overvalued stocks are in the list. The algo also considers only historical financial data and is blind to news or future developments. For example, it does not consider the potential impact of AI on these stocks. I use this list as a starting point for further analysis, not as a buy list.

Which one do you agree or disagree with? Are you surprised by any of the stocks the algo selected?

Not investment advice. DYOR.

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In April I posted a comparison in this sub of four stocks that were all down 70 to 85% from their highs: DUOL, HIMS, NKE and PYPL and concluded that Nike's crash was justified: "Revenue fell nearly 10% last year. Net income dropped 44%. Free cash flow fell 51%....The market has this one right"

Four months on Nike is the only one of the four that has fallen further, down 8.3%. So where things stand now with the FY2026 data now available?

The top line has stopped falling
After a year in which revenue fell nearly 10%, it went flat. Both margins ticked up instead of down. Leverage improved. That is a real change from what I described in April, and it is an evidence of turnaround.

	FY2024	FY2025	FY2026
Revenue	$51.36B	$46.31B	$46.40B
Revenue growth	+0.3%	-9.8%	+0.2%
Gross margin	44.6%	42.7%	42.9%
Operating margin	12.3%	8.0%	8.2%
Net income	$5.70B	$3.22B	$3.11B
Debt / equity	0.83	0.83	0.74

The cash did not stop falling
Free cash flow fell another 33% on top of the prior year's 51%. It is now a third of what it was two years ago. Nike drastically reduced buybacks to pay the dividend which is now more than the free cash flow, so the dividend is no longer covered by the cash the business produced.

	FY2024	FY2025	FY2026
Free cash flow	$6.62B	$3.27B	$2.18B
Return on invested capital	18.5%	11.6%	10.7%
Dividends paid	$2.17B	$2.30B	$2.41B
Share buybacks	$4.25B	$2.99B	$0.15B

What the Street expects next

The consensus is a trough then a full recovery. FY2027 is one more soft year, with revenue slipping below FY2026 and earnings falling about 18%. From FY2028 revenue is expected to rise every year and earnings are expected to climb past today's level. By FY2030 the Street has Nike earning $4.25, above the $3.76 it made at its FY2024 peak. Are you surprised?

Fiscal year	Revenue	Growth	Analysts	EPS
FY2026 actual	$46.40B	+0.2%	-	$2.10
FY2027	$45.71B	-1.5%	29	$1.73
FY2028	$47.38B	+3.7%	27	$2.18
FY2029	$48.65B	+2.7%	16	$2.38
FY2030	$58.26B	+19.8%	8	$4.25

What it is worth

Stockoscope's DCF puts fair value at $43.20 against a $40.51 price, so it's fairly valued. The blended estimate, which also weighs sector peers and Nike's own 10-year trading history, says $49.51. Note that DCF uses analyst estimates for revenue estimates which for FY2030 are quite optimistic.

Where does that leave Nike

So Nike has certainly shown improvement. FY 2026 is the year the top of the income statement stopped deteriorating. It is also the year cash generation got materially worse with the dividend no longer covered by the cash the business produces. So, the turnaround appears to have reached the revenue line and has not yet reached the cash flow.

What do you think? Is the Street right that there's one more bad year to get through first, or has the worst already been priced in at $40?

Data sourced from our own database, powered by FMP. Not investment advice. DYOR.

I have talked about our dividend strategy previously, but briefly, we screen for a yield of at least 2%, a payout under 70%, at least 3 straight years of raises, and a dividend covered by cash flow. Everything that passes gets scored on four weighted factors: growth 35%, safety 30%, yield 20%, consistency 15%. Growth and safety carry two thirds of the score on purpose. I would rather own a raise that keeps coming than a fat yield that gets cut but these filters and weights can be tweaked.

58 of roughly 950 US mid caps pass. Sharing five from the top 15, including some with substantial drops.

HLNE (Hamilton Lane): 2.3% yield. Private markets asset manager, down over 50% from its high in Nov 2024. The business didn't follow the stock: revenue grew 24% TTM at a 32% net margin. Eight raises in eight years, 34% payout, and it beat estimates again this week.

ESNT (Essent Group): 2.0% yield. Mortgage insurer at 9x earnings with an 18% payout, 5.5x cash flow coverage, almost no debt and six straight raises.

OLED (Universal Display): 2.2% yield. Owns the patents and sells the materials behind OLED screens. Down 60%. Has raised every year since it started paying in 2017 and just beat Q2 estimates on royalty growth, but material sales are lagging and revenue is down 8% TTM. Debt-free.

BAH (Booz Allen): 3.1% yield. Ten straight years of raises, 35% payout, down over 50%. The problem is real: about 98% of revenue comes from the US government, federal spending cuts are biting and revenue is shrinking 7%.

AOS (A.O. Smith): 2.3% yield. Water heaters and boilers and a dividend aristocrat. Over 30 straight years of raises, a 40% payout, 2.5x cash flow coverage, 27% return on equity and almost no debt. Down 30% from its high on flat revenue.

What do you think of these stocks? If you could only hold one, which one would you pick?

It's not a buy list but a shortlist for further investigation. Not investment advice. DYOR.

If you are a value investor, you want quality businesses at a reasonable price. We built a chart that plots any two metrics against each other and splits the market into four quadrants. There is a post describing how it looks here:

https://www.reddit.com/r/dataisbeautiful/comments/1vgwm2y/oc_a_chart_for_finding_quality_businesses_at_a/

The chart has nine preset combinations. Four are quality against value:

- ROIC vs EV / Sales

- ROIC vs P/E

- ROE vs P/B

- Net Margin vs EV / Sales

The other five pair up different trade offs:

- ROE vs Debt to Equity (quality against risk)

- Gross Margin vs Revenue Growth (quality against growth)

- Revenue Growth vs EV / Sales (growth against value)

- Dividend Yield vs Payout Ratio (income against sustainability)

- Free Cash Flow Yield vs EV / EBITDA (value against value)

Beyond the presets there are 37 metrics you can plot against each other if you want to dig deeper.

Which pair is most useful? which one would you add or remove?

Quick follow-up for anyone who saw my earlier posts on Microsoft and its AI spending. They reported Q4 FY26 tonight, the stock jumped 8%, and it's worth a look at what the market rewarded.

The quarter was genuinely strong. Revenue of $90.0B (up 18%), non-GAAP EPS of $4.74 (up 23%), operating income of $40.6B. Azure grew 43% and crossed $100B in annual revenue for the first time, with Copilot past 30 million paid seats. This is still a solid and growing business.

But capex didn't fall - it's rising. FY26 cash capex hit $115.9B, 35% of revenue (up from 23%), and FY27 is guided higher still ($255-260B, Q1 alone above $50B). The reported number only looks milder ($175B for 2026, down from $190B) because Microsoft stretched data-centre depreciation from 15 to 25 years and shifted some leases off the capex line. So, Microsoft is spending more but reporting less.

However, what the market liked is real: Azure's acceleration shows the capex is earning a return, and management guided to stay cash flow positive through FY27. This contrasts with Google, which has already turned cash flow negative.

So, Microsoft finally gave the market proof that its AI spending is paying off, but the spending itself is still accelerating, and the restraint is largely an accounting change, not a real slowdown in AI spending.

Not investment advice. For educational purposes only. The author and Stockoscope may hold positions in the securities mentioned, so always do your own research.

Two weeks ago I posted a DCF here saying GOOGL looked 30% overvalued on cash flow. Just a quick update based on the Q2 report.

First some good news. Cloud revenue is up a whopping 82% to $24.8 billion, and cloud operating income tripled to $8.8 billion, taking the margin from 20.7% to 35.6%. Total operating income was up 30% to $40.8 billion. This is the first real evidence that capex is converting into something (as many of you mentioned in comments to the other post), and it matters for the valuation.

Now, something Google has never done before. Free cash flow came in at negative $5.9 billion. Capex hit $44.9 billion against $39.1 billion of operating cash flow, so it ate all the cash and then some. They've also stopped buying back stock completely and raised about 50 billion of equity and 20 billion of notes. They're now spending more cash than the business generates.

Also worth noting - net income was nearly 300% and eps came in at $9.11 but 98 billion of that sits in other income which is non cash. If we remove it, eps is goes down to $2.7.

So the underlying business grew earnings about 30%, and free cash flow still went negative.

How does it impact the valuation? It pulls both ways. Capex running above my estimate pulls fair value down, while cloud compounding at 82% on 35% margins pushes the growth line up. I'll rerun it once analysts reset their numbers.

Disclaimer: This is for educational purposes only and is not investment advice. The author and Stockoscope may hold positions in the securities mentioned. Always do your own research.

PS: hit a year of posting here this week. Your pushback has genuinely made the models better, so thank you.

Two weeks ago I posted a DCF here saying GOOGL looked 30% overvalued on cash flow. Just a quick update based on the Q2 report.

First some good news. Cloud revenue is up a whopping 82% to $24.8 billion, and cloud operating income tripled to $8.8 billion, taking the margin from 20.7% to 35.6%. Total operating income was up 30% to $40.8 billion. This is the first real evidence that capex is converting into something (as many of you mentioned in comments to the other post), and it matters for the valuation.

Now, something Google has never done before. Free cash flow came in at negative $5.9 billion. Capex hit $44.9 billion against $39.1 billion of operating cash flow, so it ate all the cash and then some. They've also stopped buying back stock completely and raised about 50 billion of equity and 20 billion of notes. They're now spending more cash than the business generates.

Also worth noting - net income was nearly 300% and eps came in at $9.11 but 98 billion of that sits in other income which is non cash. If we remove it, eps is goes down to $2.7.

So the underlying business grew earnings about 30%, and free cash flow still went negative.

How does it impact the valuation? It pulls both ways. Capex running above my estimate pulls fair value down, while cloud compounding at 82% on 35% margins pushes the growth line up. I'll rerun it once analysts reset their numbers.

Disclaimer: This is for educational purposes only and is not investment advice. The author and Stockoscope may hold positions in the securities mentioned. Always do your own research.

PS: hit a year of posting here this week. Your pushback has genuinely made the models better, so thank you.

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Nvidia is worth about $4.9 trillion, trading places with Apple for the title of the most valuable company in the world. What neither of them shares is how fast Nvidia got there: revenue went from $27.0 billion in FY2023 to $215.9 billion in FY2026, an eightfold rise in three years.

A rise like that attracts a stock phrase, and Nvidia's is "priced for perfection". The idea is that everything has to go right from here, and that at this price there is no room left for disappointment.

It is a phrase people reach for rather than check. So it is worth asking what the price actually assumes about Nvidia's future, and whether that assumption is a demanding one. That is what a discounted cash flow model is for.

What analysts expect Nvidia's revenue to do

Start with the input that matters most. Our model does not guess at Nvidia's revenue, it takes analyst consensus.

Table 1. Analyst consensus revenue estimates for Nvidia, as we hold them.

Fiscal year	Revenue	Growth	Analysts covering
FY2026 (actual)	$215.9B	+65%	-
FY2027	$393.2B	+82.1%	39
FY2028	$561.3B	+42.8%	40
FY2029	$686.6B	+22.3%	26
FY2030	$774.2B	+12.8%	13
FY2031	$1,005.0B	+29.8%	16

Read the growth column. The Street is not forecasting perpetual hypergrowth. It has Nvidia going from 82% growth to under 13% in four years, which is a severe deceleration by any standard, before a late reacceleration in FY2031 that rests on 16 analysts against the 39 and 40 covering the near years. We present the estimates as they stand, but it is worth noticing which years are thinly covered.

Our model uses these figures directly for the first five years, then tapers growth down toward 3.5% over years six to ten. Taken together they work out to a five-year revenue growth rate of about 36% a year. That number is not an assumption we imposed. It is simply the compound rate of a curve that is already bending down hard.

What Nvidia is worth today

Table 2. Nvidia DCF inputs and output, 18 July 2026 model run.

FY2026 revenue	$215.9B
Revenue growth (analyst consensus, 5-year CAGR)	36.0%
EBITDA margin (normalized)	62%
Free cash flow (FY2026)	$96.7B
Discount rate (market-derived WACC)	12.4%
Terminal growth	3.5%
Fair value	$194.84
Price	$202.81
Upside	-3.9%

Start with the bottom three rows. Our model puts Nvidia's intrinsic value at $194.84 against a price of $202.81, so the stock trades about 4% above what we think it is worth.

For a company with this reputation, that is a remarkably ordinary answer. It is not the yawning overvaluation the bubble talk implies, and it is not a bargain either. There is no margin of safety at this price, but there is nothing here that looks like a mania.

What makes it interesting is what produced it. That $194.84 is not the output of a model assuming the AI boom runs forever. It is built on the consensus path in the table above, the one where growth falls from 82% to 13% in four years. The slowdown is already inside the fair value, and the stock still comes out roughly where it trades. Nvidia is not priced for perfection. It is priced for a slowdown.

Which leaves two assumptions doing the work: that revenue follows the consensus path, and that margins hold near 62%. The rest of this piece tests both.

What if the deceleration is steeper?

Nvidia's revenue is, to a first approximation, its customers' capital budget. Microsoft, Alphabet and Meta spent $225.7 billion between them on capex in FY2025, close to Nvidia's entire revenue for the year, and the four largest hyperscalers have collectively guided to roughly $725 billion across 2026. When we valued Microsoft, Meta and Alphabet, we assumed that spending eventually normalizes rather than compounding forever. That single assumption is set out in how we model AI capex, and we also ran it backwards to ask what those three prices already assume. If we are right about them, Nvidia's growth has to come down too.

Which brings us to Michael Burry, whose short thesis we worked through in December. His argument was never about Nvidia's accounting. It was that its customers are misjudging the economics of GPUs, that the chips go obsolete faster than the depreciation schedules assume, and that once the returns disappoint, the hyperscalers rein in spending.

Note what that claim actually is. It is not that Nvidia will slow down, because the Street already says that. It is that the slowdown will be sharper than the Street thinks. Burry has not published a revenue forecast, and we are not putting one in his mouth. His thesis is directional, so the scenarios below are ours, not his.

Table 3. Nvidia intrinsic value across revenue growth scenarios. 18 July 2026 model run, price $202.81.

Scenario	5-year CAGR	Implied FY2031 revenue	Fair value	vs price
Build-out runs hot, Street too cautious	40.0%	$1,163B	$227	+12%
What today's price requires	37.0%	$1,045B	$203	0%
Analyst consensus, our default model	36.0%	$1,005B	$195	-4%
Modestly steeper deceleration	32.0%	$864B	$167	-18%
Meaningfully steeper	28.0%	$739B	$143	-30%
Sharply steeper, the direction Burry argues	25.0%	$655B	$126	-38%

If analysts have it right, Nvidia is worth roughly what it trades for. If they are too cautious and the build-out keeps running hot, there is real upside: at 40% growth the shares are worth about $227, some 12% above today's price. And if they are a little too optimistic, it is worth a good deal less. Four points off the growth rate takes about 14% off the value, and eleven points off takes more than a third.

None of these are disaster scenarios. Even the lowest row still has Nvidia's revenue tripling by FY2031. That is what makes the stock difficult. You do not need anything to go wrong, you only need Nvidia to be a little less spectacular than the Street expects.

What if margins come down?

The second assumption is profitability, and it deserves as much attention as the first. Our model runs Nvidia at a 62% EBITDA margin, which is a normalized figure drawn from several years rather than the current peak, and already sits a few points below the 66.9% it earned in FY2026. It then holds that flat for a decade.

There are two reasons to wonder whether it holds. The first is competition. Even if the hyperscalers spend every dollar they have guided to, they can choose to spend less of it with Nvidia, and all of them are now designing their own AI accelerators, with help from rival chip designers, specifically to reduce what they hand over. The second is that Nvidia's own margins have never been stable. Its gross margin has already slipped about four points from its peak over the past year, during a boom, and in FY2023, the last time demand paused, its EBITDA margin fell by almost half in a single year.

So it is worth asking what Nvidia is worth at the margins it has actually earned before.

Table 4. Nvidia intrinsic value at different EBITDA margins, revenue held at consensus. 18 July 2026 model run, price $202.81.

EBITDA margin	Fair value	vs price
66.9%, its FY2026 level	$204	+1%
62%, our default model	$195	-4%
58.4%, its FY2024 level	$186	-8%
55%	$174	-14%
50%	$157	-23%
42.2%, its FY2022 level	$130	-36%

Margins are the gentler of the two levers, but not by much. Holding today's 66.9% is worth about $9 a share over our default. Slipping back to the 58.4% Nvidia earned in FY2024, which was hardly a bad year, costs about the same again. Returning to FY2022 margins would take a third off the value.

The important caveat is that these two tables are not independent. We have flexed growth and margins one at a time to keep each effect visible, but in the real world they move together: the demand slowdown that pulls revenue below consensus is exactly the environment in which pricing power erodes and margins compress. If both happen at once, the damage is worse than either table shows on its own.

So where does that leave Nvidia

At $202.81, about 14% below its May peak of $236, Nvidia is roughly fairly valued on our model. Not cheap, not obviously expensive, with no margin of safety.

What that fair value rests on is worth being clear about. It does not assume the AI boom lasts forever. It uses a consensus that already has growth falling to 13% by FY2030, and it holds margins a few points below where they are today. Both are reasonable assumptions. Neither is a fact.

Move either one and the answer changes quickly. A few points off the growth rate, or a return to the margins Nvidia earned as recently as FY2024, and the shares look expensive rather than fair. Push both the other way and there is real upside. At this price you are not paying for perfection, but you are paying for the Street being about right on two things at once.

Those are the numbers to argue about, and they are the ones you can change yourself on Nvidia's valuation page. A DCF is one lens, not a verdict. Nvidia is a candidate for your own research, not a recommendation.

Originally published on Stockoscope on 18 July 2026
https://stockoscope.com/blog/nvidia-valuation-priced-for-slowdown

The information on this page is general in nature and for educational purposes only. It is not financial product advice or a recommendation, and it does not consider your objectives, financial situation, or needs. Data is sourced from third parties and may contain errors or delays; verify against primary sources. Any modeled, historical, or illustrative figures do not predict future results. The author(s) and Stockoscope may hold positions in the securities mentioned. Consider advice from a licensed financial adviser before making any investment decision. See our full Investment Disclaimer.

Nvidia's price climbed from about $11 in 2022 (split adjusted) to over $200 currently. After a run like that, people call it overvalued or priced for perfection. The idea is that everything has to go right from here, and that at this price there is no room left for disappointment.

I built a DCF model to check if that is a correct assumption.

And the result surprised me. When I crunched the numbers, the valuation came out to be $195 against a $203 price, so NVDA is roughly fairly valued. But what's baked into this fair value makes it even more interesting.

I used the following analyst estimates of revenue for the DCF:

Fiscal year	Revenue	Growth	Analysts covering
FY2026 (actual)	$215.9 B	+65%	-
FY2027	$393.2 B	+82.1%	39
FY2028	$561.3 B	+42.8%	40
FY2029	$686.6 B	+22.3%	26
FY2030	$774.2 B	+12.8%	13
FY2031	$1,005.0 B	+29.8%	16

Look at the growth column. Analysts assume that NVDA will shift from 82% growth to under 13% over four years. That is a significant deceleration, but it is already baked into my valuation (Worth noting that the number of analysts contributing to these estimates thins out in the later years, so those figures are softer).

So the fair value of $195 is not the output of a model assuming perpetual hypergrowth. The slowdown is already inside it, and the stock still comes out roughly where it trades. Nvidia is not priced for perfection. It is priced for a slowdown.

Next, I flexed the two assumptions that were holding up the valuation, one at a time, leaving everything else at the standard model.

First revenue growth.

Scenario	5-yr CAGR	Implied FY2031 revenue	Fair value	vs price
Build-out runs hot, Street too cautious	40.0%	$1,163B	$227	+12%
What today's price requires	37.0%	$1,045B	$203	0%
Analyst consensus, our default	36.0%	$1,005B	$195	-4%
Modestly steeper deceleration	32.0%	$864B	$167	-18%
Meaningfully steeper	28.0%	$739B	$143	-30%
Sharply steeper	25.0%	$655B	$126	-38%

In the harshest row where NVDA is 38% overvalued, revenue still grows from $215.9B to $655B. It triples in five years.

The second assumption is profitability. My model runs Nvidia at a 62% EBITDA margin, which is a normalized figure across several years and already a few points below the 66.9% it earned in FY2026.

Honestly, it is a high number. If you look historically, Nvidia's margins have never actually been stable. In FY2023, the last time demand paused, revenue went flat and the EBITDA margin fell by almost half in a single year.

Slipping back to the margin Nvidia earned in FY2024, which was hardly a bad year, costs about 8%. Back to FY2022 margins takes a third off.

EBITDA margin	Fair value	vs price
66.9%, its FY2026 level	$204	+1%
62%, our default	$195	-4%
58.4%, its FY2024 level	$186	-8%
55%	$174	-14%
50%	$157	-23%
42.2%, its FY2022 level	$130	-36%

And these two tables are not independent. I flexed them separately to keep each effect visible, but in the real world a demand slowdown is exactly the environment where pricing power erodes. If both move together, it is worse than either table on its own.

So where does that leave us?
Nvidia is a fine business at a fair price. It is not a bubble and not priced for perfection. Even with a slowing of revenue growth, it is fairly priced in this model. However, a steeper revenue deceleration or meaningful margin compression would break the case and tip the stock into overvalued territory.

Disclaimer: This is for educational purposes only and is not investment advice. The author and Stockoscope may hold positions in the securities mentioned. Always do your own research.

The four hyperscalers have guided to about $725bn of capex this year, up roughly 77% YoY, almost all of it AI infrastructure. You can see it in the cash flows. Microsoft, Alphabet, Amazon and Meta are all generating more operating cash than they ever have and keeping basically none of it. OCF has surged, FCF has gone flat, and the whole gap is capex.

That's a real modelling problem, because FCF is exactly what a DCF values. To value any of these, you have to decide what capex does over the next decade and beyond, and that one assumption drives most of the answer. Most of the value sits in the terminal anyway.

The standard approach is to hold today's capital intensity flat. Whatever the company spends now as a share of revenue, assume it spends that forever. We don't think that's realistic. Capex above depreciation is growth capex, and a business growing 3% a year doesn't need to keep buying new capacity forever. Once the buildout is done, you're not building anymore; you're just replacing what wears out.

Our approach: taper, then maintenance

So we model capex in two stages:

1. Across the explicit forecast, capex glides down from the company's recent normalized rate toward maintenance, rather than sitting flat at today's level. Maintenance capex is roughly equal to depreciation: it is what replacing worn-out assets actually costs, as opposed to building brand-new capacity.
2. In the terminal value, capex is set to maintenance, the steady-state level a perpetuity can actually sustain.

We start from a normalized capex rate, a smoothed historical figure rather than one noisy year, and glide it down over a 10-year forecast (years 1 to 5 anchored to analyst consensus, years 6 to 10 tapering) before the perpetuity takes over. For Microsoft, whose normalized capex sits near 20% of revenue and whose depreciation runs near 10%, the default modeled path is: 20%, 19%, 18%, 17%, 16%, 15%, 14%, 13%, 12%, 11%, 10%, then 10% (maintenance) in perpetuity. Hot today, settling toward replacement as the company matures.

The switch: you hold the controls

Because this one assumption swings the answer so much, and because reasonable investors genuinely disagree on it, we did not want to force our view on our users. So every DCF page now carries a "Hold Capex Elevated" switch.

• Off (default): capex glides to maintenance, as above. This is the "the build-out normalizes" world.
• On: capex is held flat at the normalized rate across every explicit year and the terminal. No glide-down, no terminal normalization. This is the "AI spending never normalises" world, where replacement capex stays permanently high because the hardware keeps needing to be replaced.

Exactly one input changes between the two positions: the sustained (and terminal) capex rate moves from maintenance to the normalized actual. Growth, margins, discount rate and share count are all untouched, so the switch isolates this single assumption cleanly, and the panel recomputes the whole model in your browser the instant you flip it.

The switch off, its default position. Microsoft's capex tapers toward maintenance, and the model's intrinsic value is $482.61, about 25% above the $385.10 price.

Figure 2. The same panel with the switch on. Capex is held at its recent normalized rate across the whole forecast and the terminal value, with no taper, and the model returns $360.30, roughly in line with the price. Nothing else was touched.

Innovation

As far as we are aware, this control is unique to Stockoscope. Plenty of tools let you edit a growth or discount-rate assumption and re-run a sensitivity table; we have not found another retail valuation platform that turns the long-run capex question into a single, purpose-built switch the way this one does. That reflects the philosophy behind the whole tool. A DCF is one lens, not a verdict, and the honest thing a model can do is make its biggest assumption visible and adjustable rather than hide it inside a single number.

Using this approach, we have published case studies for Microsoft, Meta and Google over the past two weeks in r/ValueInvesting.

Read the detailed version of this blog on our platform: https://stockoscope.com/blog/how-we-model-ai-capex

A few months back I posted Oracle analysis here and was cautious. It is around $141 now, roughly at the same price, but it got there the hard way. It ran up to roughly $200 after a record June quarter, then gave all of it back. A lot of the softer signals have improved, but the one risk I actually flagged has gotten worse rather than better. So I thought it was time for a quick update.

First the good news. I wrote:

"But the bull case is built entirely on analyst estimates. The revenue doubling requires a 40% CAGR over the forecast period. Oracle's actual 9-year historical revenue CAGR is 5%. You're being asked to believe the growth rate will be eight times its historical average, sustained for years, based on a backlog that hasn't yet converted to recognised revenue."

- So far the analysts have been right. FY 2026 revenue came in almost exactly on their estimate. So I was being over cautious.

"On top of this, insiders, including the CEO, CFO, and multiple presidents, have sold more than $3 billion in shares over the past eight quarters. Purchases over the same period: roughly $1 million. The people with the clearest view of whether that backlog actually converts are not buying."

- This selling has now stopped or reversed.

"The bull case is real, on paper. Oracle holds $553 billion in remaining performance obligations - contracted future revenue"

- The backlog has since grown to $638 billion. And OpenAI's $122B raise takes some pressure off the funding question behind roughly half of it.

Now the deterioration. My original post says:

"The balance sheet makes this harder to ignore. Oracle is carrying $104 billion in debt, a debt-to-equity ratio above 5x, and free cash flow that turned negative last year after averaging $12 billion annually for nearly a decade. Across 80 large-cap tech peers, Oracle sits in the bottom 5th percentile on leverage. No other major software company has stretched its balance sheet this far while simultaneously betting on a growth inflection."

- This is where it's gone the wrong way. On 8 July, S&P cut Oracle to BBB- and the numbers behind it aren't pretty. Total debt sits around $167 billion and is still climbing. Oracle is raising capital hard to fund the buildout: a $5 billion convertible preferred in February, a $20 billion equity issuance planned this year, and tens of billions more flagged over the next three years.

"A standard DCF spits out $300 intrinsic value, implying massive upside."
"Analysts project revenue nearly doubling from $57 billion today to $130 billion by FY2028."

- The valuation math is broadly unchanged. It still runs on analyst revenue estimates, now around 30% a year, with revenue tripling to roughly $218 billion by FY2030. The difference is that the first year of that ramp actually happened, so those estimates carry more credibility than they did when I first wrote about it.

So where does that leave us? The demand is real and the backlog is enormous, but the whole thesis now rests on execution. Our DCF still says the reward is there at roughly $300 against $141 today. But that number assumes clean execution, and the S&P cut is the market reminding you that clean execution is exactly what's in doubt. Cheap for a reason, or cheap despite a fixable problem. That's the call you're actually making here.

Disclaimer: This is for educational purposes only and is not investment advice. The author and Stockoscope may hold positions in the securities mentioned. Always do your own research.

Over the last couple of weeks, I posted DCFs on the three big hyperscalers - Microsoft, Meta, and Alphabet. The most common pushback, especially on the Google post, was that I was counting the cost of the AI capex without giving credit for the return it will eventually earn. It was a fair criticism, so instead of arguing about it, I ran the model backwards to actually estimate the numbers. Read the other posts to fully understand the reasoning.

One thing to clear up first: my DCF is not blind to the payoff. It drives revenue off analyst estimates, and analysts have already baked their view of the AI return into those numbers. So the return is in there, second hand, through consensus growth.

So I asked this question: at today's price, how much does each company actually have to deliver to be exactly fairly valued? I solved it two ways, one lever at a time. What if revenue grows faster or slower, and what if the margin changes? Here are teh results (numbers might be slightly different than in my other posts as they are from today's data):

Company	My DCF value	Price	Revenue growth to be fairly valued	vs 17% consensus	Or EBITDA margin	vs today
GOOGL	$252	$362	25.7%	+8 pts	52%	+14 pts
MSFT	$483	$383	12.6%	-5 pts	46%	-9 pts
META	$637	$603	6.6%	-1 pt	46%	-2 pts

So what does the analysis tell us:

- GOOGL has to beat the Street. To justify $362, revenue has to compound about 25.7% a year, roughly eight points above the 17% consensus used in the model. That is revenue reaching about $1.27 trillion by 2030, versus the $900B analysts already model. Or the margin has to jump from about 38% to about 52%.

- MSFT is the opposite. It is already undervalued at consensus, so it has room to spare. Revenue can grow about five points slower than consensus, or the margin can fall about nine points, and it is still fairly valued at today's price. That is the cushion the selloff has built in.

- META sits almost on the line. A small cushion, about one point of growth or two of margin, and it is fairly valued. The price is close to what revenue growth analysts already assume.

Note that all three analyses are based on the default capex model, which assumes capex tapers off over time.

Disclaimer: This is for educational purposes only and is not investment advice. The author and Stockoscope may hold positions in the securities mentioned. Always do your own research.

Last year I posted a breakdown in this sub arguing Microsoft was overvalued at $490 because of its capex spend. But that thesis was never really about Microsoft - it applies to every hyperscaler pouring money into AI. Last week I updated my MSFT valuation and applied the same model to Meta. Today, I'm pointing it at Alphabet. Please read the previous posts for details about the methodology.

Capex and cash flow

In FY2025, Alphabet's operating cash flow jumped from $125B to $165B in a single year, but free cash flow barely moved. The entire difference, roughly $39B of extra operating cash, went into capex, which nearly doubled from $52B to $91B in one year and climbed from 15% to 23% of revenue.

So Alphabet is generating far more cash than ever and keeping almost none of it. And the speed is accelerating. Alphabet has guided 2026 capex to roughly $175-190B, more than double the 2025 figure. This impacts DCF valuation.

Fiscal year	Capex / revenue	Operating cash flow	Free cash flow
FY2020	12.2%	$65.1B	$42.8B
FY2021	9.6%	$91.7B	$67.0B
FY2022	11.1%	$91.5B	$60.0B
FY2023	10.5%	$101.7B	$69.5B
FY2024	15.0%	$125.3B	$72.8B
FY2025	22.7%	$164.7B	$73.3B

DCF Valuation

Our DCF approach glides capex from today's elevated rate down toward maintenance over the forecast, and uses maintenance in the terminal value. It assumes the AI surge is temporary on the logic that no company can spend 20% plus of revenue on capex forever.

Here are teh valuations, changing only the capex assumption, holding everything else constant:

What you assume long-run capex does	Fair value	vs Price
Glides down to maintenance (our default)	$252	-30%
Glides from the FY2026 pace (~37%) down to maintenance	$213	-41%
Stays permanently elevated at ~18% of revenue	$160	-55%
Glides from the FY2026 pace down to that elevated ~18%	$126	-65%

Unlike MSFT and META, every single row in the table is below the current price. Even the most generous case, assuming that the buildout fully normalizes, leaves GOOGL about 30% overvalued. (We added a switch to the valuation page so you can toggle the assumption yourself and watch fair value move).

Because a contrarian DCF is easy to dismiss, I dug up other publicly available DCF estimates to see how ours compares:

Source	DCF fair value	vs price
Stockoscope	$252	-30%
MiniValuator	$259	-28%
Alpha Spread	$308	-14%
Simply Wall St	$361	fair-valued

All of them land at or below the price. Although I am not sure how they handle capex, none of them calls Alphabet a bargain on cash flow.

So where does that leave it
No doubt Alphabet is an extraordinary business. I'm also aware that Berkshire bought a lot of it (and I have huge respect for them), but I can't call this a wonderful business at a fair price, even if I want to. Google looks cheap on the surface, trading at about 27 times earnings. Yet on our DCF, it screens roughly 30% overvalued. And it's not just our model - every DCF-based estimate I could find lands at or below the current price.

However, that does not make it a short, and it does not mean the stock cannot keep rising. Great businesses trade above intrinsic value for years. It means the margin of safety is negative right now, and the thing that would change that is either a lower price or evidence that the AI spending is converting into free cash flow.

That completes the three-part series on the impact of capex on hyperscalers. Thanks for engaging with it and for all the feedback. One thing I haven't done yet is evaluate what all this means for NVDA (that's where this all started) - which is what I plan to tackle next.

Disclaimer: This is for educational purposes only and is not investment advice. The author and Stockoscope may hold positions in the securities mentioned. Always do your own research.