$Advanced Micro Devices (AMD.US)$$NVIDIA (NVDA.US)$$Cloudfla...

$Advanced Micro Devices(AMD.US)$ $NVIDIA(NVDA.US)$ $Cloudflare(NET.US)$ Companies that have high R&D spend with high profit margins almost always have high or even negative p/e values. Good examples are NVDA, AMD, NET, ROKU etc. All businesses with profit margins of 60% or more and high R&D spend.

Due to their high profit margins they can scale and grow earnings faster than other businesses. A business with 70% profit margins that grows revenues by 10% is growing earnings 350% faster than a business with the same revenue but only a 20% profit margin.

Profit margins are basically a multiplier on earnings growth.