NOT TOO LATE! I'm Buying Nvidia Stock (NVDA) After Earnings!

Introduction

Nvidia just completed its most crucial earnings call to date. Whether you're a long-time Nvidia shareholder or contemplating investing in Nvidia stock for the first time, understanding the implications of this earnings call is vital. The outcomes from Nvidia's performance extend far beyond mere revenues and profit margins; they essentially determine the momentum and scale of the ongoing AI revolution.

Anticipation Surrounding Nvidia's Earnings Call

The hype surrounding Nvidia's earnings call can’t be overstated. The call was highly anticipated, especially following the launch of ChatGPT by OpenAI in November 2022, which significantly accelerated investors' interest in AI. The stock market's returns have been primarily driven by the "Magnificent 7"—a group of companies including Amazon, Meta Platforms, and Tesla—that have invested heavily in AI due to their established infrastructure and deep financial pockets.

Among these companies, Nvidia stands out. As a primary supplier of AI chips, Nvidia has become the go-to provider during this AI gold rush. If Nvidia's revenues were to fall short of expectations, it would imply a slowdown in investments towards AI infrastructure, potentially stalling the revolution. Conversely, robust revenue growth would signal that the AI revolution could be expanding more rapidly than anticipated, boosting forward estimates for other sectors.

Eye on Blackwell: Nvidia's Next-Gen AI Chip

This earnings call was particularly pivotal because it introduced Nvidia's Blackwell chip, the successor to their current generation of GPUs. The performance leaps promised by Blackwell are substantial—it boasts four times better performance in AI training and 30 times better AI inference capability compared to Nvidia's previous architecture.

However, the stock fell 8% post-earnings despite recording a staggering $ 30 billion in quarterly revenues and a 68% earnings per share improvement. The decline was largely attributed to a contraction in gross margins, which fell to 75.1%. This dip was expected due to production constraints and potential delays surrounding Blackwell. Factors affecting yields in Blackwell's production include chip placement precision—crucial for the high-speed connections that characterize its architecture.

Nvidia's Market Dominance and Development Plans

Nvidia's data center revenues now account for a staggering 88% of total revenues, indicating its robust position in the market. With a 90% share of the data center GPU market, Nvidia holds significant pricing power, confidently pushing toward estimates of over $ 100 billion in AI accelerator revenue this year.

In addition to launching Blackwell, Nvidia is ramping up its Ethernet-based networking solutions. The firm approved another $ 50 billion in stock buybacks, showcasing long-term confidence in their business. Future developments include Nvidia's new microservices as part of its ecosystem—a revenue multiplier that will serve companies through subscription-based GPU access.

Risks Faced by Nvidia

While Nvidia's competition exists, it largely does not pose a significant threat. Major players like Intel and AMD hold a fraction of the data center market compared to Nvidia. Additionally, tech giants like Amazon and Microsoft develop their own chips but do not commercially sell them, indicating that Nvidia's focus on general-purpose GPUs remains unmatched.

Nvidia's primary risks lay in its complex production ecosystem and supply constraints. The company remains supply constrained but is confident in ramping up production to meet the burgeoning demand for AI solutions, especially with Blackwell on the horizon.

What's Next for Nvidia Stock?

Nvidia's journey is exciting, and shareholders can expect some solid developments in the near future. Following the anticipated ramp-up of Blackwell's sales, Nvidia is also expanding its networking solutions, which play a critical role in AI workloads. Additionally, after launching various graphics cards, Nvidia's focus on microservices promises to further enhance revenues.

Investors can take comfort in recent reassurances from leadership about Blackwell’s production efforts and the future growth stemming from Nvidia’s continuous innovations and expansions.

Keyword

Nvidia, earnings call, AI revolution, Blackwell chip, data center revenues, stock buybacks, market share, supply constraints, competition, Nvidia stock.

FAQ

1. What were Nvidia's earnings results? Nvidia posted record revenues of $ 30 billion for the quarter, with earnings per share of 68, representing significant year-over-year growth.

2. Why did Nvidia's stock drop despite positive earnings? The stock fell 8% due to a drop in gross margins, which were influenced by production constraints and a delay in the Blackwell chip's rollout.

3. How does Blackwell compare to previous Nvidia chips? Blackwell performs four times better in AI training and 30 times better in AI inference compared to the previous generation, Hopper.

4. What risks does Nvidia face? Nvidia’s main risks revolve around production complexity, supply constraints, and increasing competition from AMD, Intel, and tech giants creating their own chips.

5. What can shareholders expect in the future? Shareholders can look forward to the ramp-up in Blackwell sales, upcoming innovations in networking solutions, and continued share buybacks indicating long-term confidence in Nvidia's growth.