Why Interactive Brokers Is a Surprising Long-Term Outperformer to Nvidia

In the dynamic landscape of 2025, the investment world has witnessed an unexpected shift: Interactive Brokers (IBKR) has outperformed Nvidia (NVDA), a titan of the AI revolution, with a year-to-date stock return of nearly 60% compared to Nvidia's 39% according to financial analysis. This divergence raises critical questions about the sustainability of growth, valuation discipline, and cyclical exposure in two seemingly disparate sectors. While Nvidia's dominance in AI hardware has captivated investors, Interactive Brokers' under-the-radar momentum suggests a compelling case for long-term outperformance rooted in compounding client value, conservative valuation, and a more predictable business model.

Sustainable Growth: Compounding vs. Speculative Cycles

Interactive Brokers' growth trajectory is anchored in its ability to compound client accounts and expand its low-cost brokerage model. For instance, in Q3 2025, customer accounts surged 32% year-over-year, while client equity ballooned to $757.5 billion. This growth is driven by a platform that prioritizes execution quality, global market access, and automation-attributes that reduce costs and attract a broad client base. Analysts highlight that IBKR's focus on compounding client equity and expanding its crypto offerings positions it to benefit from secular trends in democratized investing and digital assets.

In contrast, Nvidia's growth is tied to the volatile AI hardware cycle. While its GPUs power the current AI boom, demand is highly dependent on speculative momentum in the sector. Data from 2023–2025 shows Nvidia's gross profit margin rising to 75% and net profit margin to 53%, reflecting pricing power and operational efficiency. However, these metrics mask the risk of over-reliance on a single, rapidly evolving market. As one analyst warns, "Nvidia's valuation assumes perpetual AI hype, which may not hold as the cycle matures."

Valuation: Conservative Metrics vs. Premium Multiples

Interactive Brokers trades at a P/E ratio of 37, significantly lower than Nvidia's 53 according to financial analysis. This gap reflects divergent risk profiles: IBKR's valuation aligns with traditional financial services benchmarks, with an EV/EBITDA of 4.55x and a P/S ratio of 4.78x according to valuation data. These metrics suggest a value-oriented approach, where earnings and cash flow are prioritized over speculative growth. By contrast, Nvidia's P/S ratio of 23.7x and EV/EBITDA of 5.12x according to financial data indicate a premium valuation justified only by extraordinary cash flow generation and market leadership. Yet, as of December 2025, Nvidia's P/E of 46.93 is 12% below its 10-year average of 53.33, hinting at potential mean reversion if AI demand slows.

Interactive Brokers' conservative valuation is further supported by its dividend policy. With a 0.51% yield and consecutive annual increases, the firm returns capital to shareholders while retaining enough for reinvestment. Nvidia, meanwhile, has allocated $33.71 billion to share repurchases in FY2025 but retains most earnings for R&D and innovation. While this strategy fuels growth, it also leaves the stock vulnerable to valuation corrections if AI adoption plateaus.

Cyclicality: Divergent Exposures and Risks

Both firms operate in cyclical industries, but the nature of their cycles differs. Interactive Brokers' performance is tied to trading activity, interest rates, and market volatility. For example, its Q3 2025 net interest income rose 21% year-over-year, driven by securities lending and margin loans. However, falling volatility or interest rates could pressure this income stream. Analysts note that IBKR's risks are more predictable and manageable, with a focus on compounding client accounts mitigating short-term fluctuations.

Nvidia's cyclicality is linked to AI hardware investment cycles. Its data center revenue grew 69% year-over-year in Q3 2025, but this growth depends on sustained demand for GPUs in training large models. As one report cautions, "The AI boom could resemble a speculative bubble, with demand cooling rapidly as models mature." This contrasts with Interactive Brokers' tailwinds, which stem from structural trends like global market participation and digital asset adoption according to company reports.

Conclusion: A Case for Long-Term Resilience

While Nvidia's AI-driven narrative has dominated headlines, Interactive Brokers' outperformance in 2025 underscores the merits of a more grounded, compounding-focused strategy. Its conservative valuation, predictable cash flows, and expanding client base position it to weather macroeconomic shifts better than a high-multiple tech stock. For investors seeking sustainable growth amid cyclical uncertainty, IBKR offers a compelling alternative to the AI hype machine.