ii view: Nvidia’s next gen Blackwell product spearheads advance

Second-quarter results to 28 July

• Revenue up 122% year-over-year to $30 billion
• Adjusted earnings per share up 152% to $0.68
• Gross profit margin of 75.7%, down from 78.9% in the prior first quarter
• Cash dividend unchanged from the previous quarter at $0.01 per share

Guidance:

• Expects third-quarter sales of around $32.5 billion 
• Expects full-year gross profit margin to be in the mid-70% range (76% for Q4 2024)

Chief executive Jensen Huang said:

“Nvidia achieved record revenues as global data centres are in full throttle to modernise the entire computing stack with accelerated computing and generative AI. Blackwell samples are shipping to our partners and customers. 

"Generative AI will revolutionise every industry.”

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ii round-up:

Started in 1993 by current CEO Jensen Huang, NVIDIA Corp (NASDAQ:NVDA) today makes computer microchips used across arenas such as datacentres, gaming and automotive computing. 

Nvidia products used in data centres generate its biggest slug of revenues at around 88%, followed by gaming and PC related sales at almost 10%. Automotive, robotic and PC visualisation sales account for the balance.  

For a round-up of these latest results, please click here. 

ii view:

Headquartered in Santa Clara, California, Nvidia credits its invention of the Graphics Processor Unit (GPU) in 1999 for fuelling the boom in the PC gaming market. Today, wide use of its microchips and own supporting Cuda software in data centres globally leaves it describing itself as the world leader in accelerated computing. 

Nvidia’s current Hopper chip platform product, launched in early 2022, and powerful enough to run artificial intelligence (AI) software, is now to be superseded by its new and even more powerful Blackwell product. Organisations expected to adopt Blackwell include Amazon.com Inc (NASDAQ:AMZN) Web Services (AWS), Dell Technologies Inc Ordinary Shares - Class C (NYSE:DELL), Google owner Alphabet Inc Class A (NASDAQ:GOOGL), Meta Platforms Inc Class A (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), OpenAI, Oracle Corp (NYSE:ORCL) and Tesla Inc (NASDAQ:TSLA).  

For investors, concerns regarding a potential dip in gross profit margin given the rollout of its next generation Blackwell product warrants consideration. US government restrictions on sales of its top-spec products to China persist. Power consumption concerns for the wider datacentre industry sit against climate change threats, while the worries of many governments regarding the potential power of AI and its impact on human society continue to require deep contemplation. 

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To the upside, demand for its datacentre related products is going from record to record, with future demand potentially supported by the new Blackwell product. Nvidia’s supply chain management has proved robust to date. The potential for AI innovation including new ground-breaking medicines cannot be ignored, while founder Jensen Huang with all his many years of experience, continues to lead the company.

In all, valuing Nvidia, given its status as the eminent play by investors on the future of AI, remains difficult and leaves the shares extremely volatile day-to-day. That said, sales momentum at its now core datacentre products continues, with the consensus analyst target price coming in at just over $148 per share.     

Positives: 

• Exposure to growth in data centres and AI
• Launching new generation product

Negatives:

• Uncertain economic outlook
• US and China tensions

The average rating of stock market analysts:

Buy