Artificial intelligence (AI) darling Nvidia Corp. (NASDAQ:NVDA) beat expectations yet again with impressive third-quarter revenue and earnings reported after Wednesday's market close.
What happened: The world's most valuable company disclosed third-quarter revenue of $35.1 billion and earnings per share of 81 cents, both beating analysts' estimates.
The Jensen Huang-led firm has had a blockbuster run on equity markets in the last few years, multiplying investors' money by orders of magnitude.
Indeed, Nvidia shares have exploded by 2,718% in the last five years, outperforming all well-known companies on Wall Street.
In comparison, Bitcoin (CRYPTO: BTC)—the world's most valued cryptocurrency exerting a similar influence on the digital assets market—grew 1,171% over the last five years.
See Also: Microstrategy's Michael Saylor To Advocate For Bitcoin At Microsoft Board Meeting, Offers To Educate Rumble CEO As Well
Which Is Offering Better Returns Relative To Risk?
Both Nvidia and Bitcoin are risk-laden investments, and traders must navigate their inherent volatility to profit.
To get a more accurate picture, analysts track the Sharpe Ratio, a measure of risk-adjusted returns.
For Bitcoin, this ratio stood at -5 as of this writing, per TradingView, implying that the expected return was lower than that of a risk-free investment, such as a Treasury yield.
On the other hand, Nvidia showed a Sharpe ratio of 0.69, indicating that investment in the stock was generating positive returns above the risk-free rate.
Are Their Valuations Inflated?
Another metric to compare the two hot financial assets was whether they were expensive or cheap relative to their fundamentals.
For stocks, this is typically measured by the price-to-earnings ratio, or simply the P/E ratio.
Nvidia's P/E ratio showed a reading of 73.478 per TradingView, suggesting that the stock was highly overpriced. It could also imply that investors expect the company to have stronger performance and higher earnings in the future.
The P/E counterpart for Bitcoin is the network value to transactions ratio or NVT ratio.
According to on-chain analytics firm CryptoQuant, the 30-day EMA of Bitcoin's NVT was at 28.28 at the time of writing, a decline from 36.32 recorded at the beginning of the month.
The decline implied that transaction volume was outperforming market growth or that valuation had dropped without any change in transaction activity.
Price Action: At the time of writing, Bitcoin was trading at $97,396.60, rising 4.97% in the last 24 hours, according to data from Benzinga Pro. Shares of Nvidia were down 2.49% in after-hours trading.
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Photos courtesy: Nvidia and Pixabay
