Nvidia Is Both Shariah-Compliant and Not — How Is That Possible?

· Shariah screening follows two main approaches. The quantitative tests either use a company's total assets or its market capitalization to measure financial ratios after passing the initial qualitative screen.

· Nvidia illustrates the difference clearly. It fails when measured against the Total Asset methodology but passes under the Market Capitalization methodology, proving how the same company can be judged differently depending on the shariah methodology applied.

· MYTHEO Izdihar adopts a unique hybrid approach by embracing three methodologies from both camps. This gives investors access to a wider universe of Shariah-compliant opportunities while making portfolios more stable and consistent.

Nvidia: Shariah-Compliant or Not?

When you think of Nvidia, you think of AI, record-breaking profits, and a US$4 trillion market cap that made it the most valuable company in the world. But here's what most investors don't know: Nvidia can be classified as both Shariah-compliant and non-Shariah-compliant at the same time.

How is that possible? It all comes down to which Shariah screening methodology. This is something many investors, even those who strictly follow Shariah-compliant investments, may not realise. And it raises a critical question: could your portfolio be missing out on the biggest growth opportunities simply because of the screening method being used?

Why the difference?

The key difference lies in the Shariah screening methodology. All processes begin with a qualitative screen that excludes prohibited activities such as alcohol, gambling, conventional banking, pork, and weapons. At this stage, most methodologies are largely similar.

Once a company passes the qualitative test, the focus shifts to the quantitative screen, where financial ratios are assessed. Here, three key ratios are measured:

· Cash · Debt · Accounts receivable

It is at this stage that methodologies diverge, creating two main approaches:

1. Total Asset-Based Screening This method uses a company's total assets as the denominator. It is the approach applied by the Shariah Advisory Council (SAC) of the Securities Commission Malaysia in classifying listed securities on Bursa Malaysia. Global index providers such as FTSE also adopt this methodology.

2. Market Capitalization-Based Screening This method uses a company's market capitalization as the denominator. It is the approach followed by international bodies such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and S&P Global.

In practice, under the Total Asset approach, a company's cash, debt, and receivables are measured relative to its total assets as reported in the balance sheet.

Under the Market Cap approach, the same items are measured relative to the company's market capitalization, which is calculated as the share price multiplied by the number of shares issued.

Across both methods, the thresholds are broadly the same: cash and debt must remain below 30% while receivables must stay below 50%. If any ratio exceeds the threshold, the company is deemed non-Shariah compliant and excluded from Shariah-focused funds.

To see how these two approaches can produce very different outcomes, let's take Nvidia as an example.

Table 1: Nvidia Financial Metrics as at 31 July 2025

Nvidia	Amount (USD 'bil)
Total Assets	$140.74
Average 12-Month Market Cap	$3,320.00
Cash	$59.79
Debt	$8.47
Total Receivables	$27.81

Source: Nvidia Quarterly Results report, August 2025

Table 2: Ratio Analysis (%)

Shariah Screening Ratio	% of Total Assets	% of Avg. Market Cap
Cash Ratio	42.5%	1.8%
Debt Ratio	6.0%	0.3%
Receivables Ratio	19.8%	0.8%

Source: GAX MD, August 2025

As highlighted earlier, the standard Shariah thresholds are 30% for cash and debt ratios, and 50% for receivables.

Based on Nvidia's latest financial results as of 31 July 2025, the company fails the Shariah-compliance test under the Total Asset-based methodology. Its cash ratio of 42.5% exceeds the 30% threshold, rendering it non-compliant by this measure.

In contrast, under the Market Capitalization-based methodology, Nvidia comfortably passes the Shariah-compliance test. Its cash ratio stands at just 1.8%, well within the permissible limit.

What This Means for Investors?

As an investor, the critical question is this: which Shariah methodology is your fund manager using? The answer could be the difference between capturing opportunities or missing them.

Most funds in the market commit to just one methodology, either the Total Asset approach or the Market Capitalization approach. But each comes with its own blind spots.

Relying only on the Total Asset methodology risks excluding many of today's most innovative growth companies, particularly in software and chip design. These businesses do not require heavy investment in physical assets or manufacturing plants, which leaves them with relatively small total assets on their balance sheets. As a result, their financial ratios such as cash or receivables appear inflated and exceed the permissible thresholds, causing them to fail the Shariah screening test.

On the other hand, the Market Capitalization method can be overly sensitive to share price movements. A drop in share price can suddenly push a company outside compliance, even when nothing about its business has changed. This means investors could miss attractive opportunities simply due to short-term market swings.

What Sets MYTHEO Izdihar Apart?

You might already be aware that we launched MYTHEO Izdihar in July 2025. It was created to address a challenge many investors face: the limitations of relying on just one Shariah methodology.

Rather than restricting ourselves to a single standard, MYTHEO Izdihar takes a hybrid approach, including companies that qualify as Shariah-compliant under either methodology.

This inclusive strategy is reflected in our selection of five carefully chosen ETFs. The portfolio draws on three methodologies from both camps: FTSE, which applies the Total Asset-based approach, and S&P and Dow Jones, which adopt the Market Capitalization-based approach.

By combining these methodologies, MYTHEO Izdihar avoids being confined to one approach, reducing the risk of overlooking valuable opportunities. From asset-light innovators to undervalued gems, the portfolio is built to capture them all while staying firmly aligned with Shariah principles.

Discover how MYTHEO can enhance your portfolio diversification today and embark on your financial journey with confidence. Take the first step towards your financial goals now .