Better Than Nvidia? Top Investor Touts This Payment Firm's Durable Profits More 'Sustainable'

A prominent investor has drawn attention to a payments firm that boasts profit margins similar to those of NVIDIA Corporation NVDA but is considered to be a more sustainable investment.

What Happened: Hannah Gooch-Peters, a global equity investment analyst at Sanlam Investments, pointed out that the current valuation of Nvidia might be overestimating the company’s future sales and profits. She made these remarks during a CNBC Pro Talks session at the London Business School, reported CNBC.

Gooch-Peters suggested that the sustainability of Nvidia’s profit margins should be questioned, given the company’s 75% gross margin and its reliance on hardware. She then contrasted Nvidia’s situation with that of Visa Inc V, which boasts a 60% operating profit margin and a robust “networking effect.”

"If you've got 75% gross margin, and it's a hardware company at the end of the day, you've got to ask yourself, what is the company's ability to sustain those gross margins?" she said.

She explained that as more banks, merchants, and consumers adopt Visa’s payment network, it becomes more valuable and indispensable. This creates a strong competitive moat and helps sustain the company’s high-profit margins over time.

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Visa is a top-10 stock in Sanlam’s Global High-Quality equity fund, which manages over $585 million in assets. The stock has risen by 7% this year, and analysts expect it to rise another 9.3% over the next 12 months.

Why It Matters: Visa and Mastercard Inc. MA recently made headlines with their groundbreaking $30 billion settlement with U.S. merchants. This settlement, one of the largest ever, is expected to impact the credit card industry significantly.

The settlement with U.S. merchants entails an agreement to reduce credit card interchange fees by 4 basis points in the U.S. and cap swipe fees until 2030. This move is perceived as a victory for merchants and a potential boon for consumer choice.

Nvidia, on the other hand, has been dominating the data center GPU market, capturing 92% of the market. This underlines the U.S. leadership in the generative artificial intelligence market.

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