Nvidia’s Most Valuable Asset Is Not on Its Balance Sheet
Ignoring intangible capital can skew productivity and growth figures.
- By
- June 30, 2026
- CBR - Accounting
Companies today are generating more and more value from intangible assets. Those intangibles—such as customer data, technology, research and development, and brand identity—now account for over half of the total value of acquired assets in mergers and acquisitions, up from about one-third in the early 2000s, research from Stanford’s John D. Kepler and Chicago Booth’s Charles McClure and Christopher Stewart finds. Customer data on their own account for about 23 percent of acquired assets, totaling over $1.1 trillion.
Yet US accounting practices typically exclude intangibles from company balance sheets in favor of observable assets such as buildings, machinery, and raw materials, they write. This means company-level productivity measurements also ignore intangible capital. The researchers argue that failing to include intangibles in these calculations can skew productivity figures and lead to misstated growth prospects.
To study this, the researchers turned to financial records on mergers and acquisitions. An acquiring company typically considers all assets, tangible and intangible, when evaluating a target company’s purchase price. After the sale closes, the buyer has to determine how much of the purchase price should be attributed to both tangible and intangible assets.
Using annual filings from 2002 to 2024, Kepler, McClure, and Stewart examined close to 21,000 M&A transactions, valued at approximately $15 trillion, for public companies including Kraft Foods, LinkedIn, and Time Warner. They collected and categorized the values of all the target companies’ assets.
The researchers measured each company’s productivity before acquisition in order to understand how much of an effect intangible capital had on output prior to any merger activity. Then they ranked all companies in their sample by total factor productivity (TFP). The higher the number, the more productive the firm.
The TFP calculation doesn’t typically include intangible assets. But including them moved more than 70 percent of acquired companies into a different productivity tier, affecting which of them appeared more or less efficient. The average change was nearly 70 percent. The largest shift in TFP rank was in manufacturing, at more than 94 percent, largely due to the growing importance of customer data. Overall, when intangible assets were included in TFP, they accounted for about 12 percent of company revenue, compared with 14 percent for tangible assets, suggesting a nearly equivalent impact.
A growing share of production is intangible
Whether a company rose or fell in the TFP rank depended on the type of intangible asset most closely associated with its revenue. In addition to customer data, assets such as technology and brand capital were also associated with downward revisions to TFP, implying that excluding them led to inflated productivity measurements.
McClure references the tech company Nvidia to illustrate how including intangibles can provide a more realistic view of productivity. Some of Nvidia’s most valuable assets could include patents it has on chip architecture or a particular production process that allows it to be efficient, he says. “If we don’t observe these intangibles, we will misattribute their effect to some secret sauce that allows Nvidia to be more productive,” he says. “Once we account for intangibles, our estimate of a firm’s productivity will change as we see more of the inputs.”
On the other hand, in-process research and development was associated with upward revisions to TFP. “R&D won’t influence the current year’s output because it relates to costs that won’t lead to sales until the future,” McClure says. “If we don’t recognize R&D separately, those costs would be erroneously attributed to the firm being less productive.”
The researchers also find that including intangibles in productivity calculations helped to better predict sales growth, sales per employee growth, and R&D investment growth. They based this finding on the companies’ performance in the year preceding their acquisition.
“During the due diligence of the acquisition, acquirers have an information advantage over public equity investors, which gives them a clearer view of the target’s intangible assets,” McClure says.
When the researchers considered the additional information on company efficiency, they find that it accounted for about 15 percent of the variation in the M&A deal premiums buyers were willing to pay.
In 2024, the Financial Accounting Standards Board solicited public input on whether companies should recognize intangibles on their balance sheets. The researchers contend that, as intangibles become ever more critical, recognizing them would enable more accurate public measurement of companies’ productivity and growth prospects.
John D. Kepler, Charles McClure, and Christopher Stewart, “Intangible Capital and (Mis)measured Productivity,” Working paper, January 2026.
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