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Nvidia – The Blackwell Ramp

Nvidia (NVDA) $121 (AI) (Semiconductors)

And here we are ramping Blackwell, and it’s in full production,” said Nvidia CEO Jensen Huang, during the Goldman Sachs Communacopia + Technology Conference. “We’ll ship in Q4 and scale it — start scaling in Q4 and into next year. And the demand on it is so great … and so the intensity is really, really quite extraordinary.”

https://seekingalpha.com/news/4152814-nvidia-trends-up-as-blackwell-release-date-nears

“Blackwell chips are expected to see 450,000 units produced in the fourth quarter of 2024, translating into a potential revenue opportunity exceeding $10B for Nvidia,” according to a post today on X.

The estimate during the August conference call was for $3Bn Blackwell revenue in Q4, so this is a big change. Fundamentally there wasn’t any real difference, just the quarterly cadence from Q4 to Q1, but this does help the stock in the short term and more importantly should put to rest any rumors or doubts about Blackwell design flaws.

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Semiconductors Stocks

Nvidia (NVDA) Q1-2024 Earnings Preview: High Expectations and Market Optimism

Source: Nvidia

Nvidia Earnings Preview – Q1-2024 

The big event is finally here (Post-market Wednesday, May 22nd) and expectations are sky-high! 

Consensus estimates are for earnings of $5.58 (up 412% YoY) and revenues of $24.6Bn, (up 242% YoY). However, analysts seem to be pointing out that anything less than $5.75 and $26Bn would lead to disappointments. Similarly, expectations for higher guidance for Q2 are also, well, high. Just meeting consensus estimates of $6 per share and $27Bn won’t cut it.

Wall Street remains optimistic – the average price target is $1,040 a 9% upside, with a high of $1,400 from Rosenblatt Securities, who believe that there won’t be any air pockets transitioning from the H(Hopper) series to the B (Blackwell) series, even as AWS this morning confirmed that they would wait for the Blackwell to ship before buying more Hoppers.

Other Wall Street analysts also have higher-than-average targets from $1,100 (Barclays) to $1,200 (Baird).

Seeking Alpha analysts, not to be outdone also talk of the large and growing TAM, with one estimate of $600Bn by 2030, extrapolating growth from the Chips Act, the massive Capital expenditures from mega-caps like Microsoft, Google, Meta, and Oracle, plus the partnership with Dell, new AI use cases and even proxying TSM’s manufacturing capacity. So yes, there are plenty of defensible theories about why this AI gravy train won’t slow down.

For my part, I last bought Nvidia for around $780 on April 22nd, and with a high exposure in it, don’t plan to add more for now. It should remain a very strong, high-conviction, core holding for a long time. I will be looking out for other AI stories.

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Semiconductors Stocks

Nvidia (NVDA) Achieves New Record: Q1 Earnings Beat and Forward Split Announcement

Nvidia (NVDA) Post Market $990 New Record.

  • Another beat, 10:1 forward split new record price, and higher guidance
  • Nvidia press release (NASDAQ: NVDA): Q1 Non-GAAP EPS of $6.12 beats by $0.54.
  • Revenue of $26.04B (+262.2% Y/Y) beats by $1.45B.
  • Record quarterly Data Center revenue of $22.6 billion, up 23% from Q4 and up 427% from a year ago
  • Ten-for-one forward stock split effective June 7, 2024
  • The quarterly cash dividend raised 150% to $0.01 per share on a post-split basis.
  • Q2 Outlook: Revenue is expected to be $28.0 billion vs. consensus of $26.84B, plus or minus 2%.
  • GAAP and non-GAAP gross margins are expected to be 74.8% and 75.5%, respectively, plus or minus 50 basis points. For the full year, gross margins are expected to be in the mid-70% range.
  • GAAP and non-GAAP operating expenses are expected to be approximately $4.0 billion and $2.8 billion, respectively. Full-year operating expenses are expected to grow in the low-40% range.
  • GAAP and non-GAAP other income and expenses are expected to be an income of approximately $300 million, excluding gains and losses from non-affiliated investments.
  • GAAP and non-GAAP tax rates are expected to be 17%, plus or minus 1%, excluding any discrete items.
  • Shares +4.3%.
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Semiconductors

Nvidia (NVDA) Update: Exceeding Expectations but Facing Margin Challenges

source:nvdia

Nvidia’s results exceeded expectations as usual, kind of becoming a habit! The previous quarter’s (Jan 2024) revenue beat by $1.6Bn and it guided Q1-FY25 (April 2024) revenue 10% or 2Bn higher to $22Bn.

Shares took off from $675 to $725. Everybody’s happy. 

Now comes the tough part.

Nvidia had a net profit margin of 55% = $12.2Bn in profits on $22Bn in sales. That is drug lord margin territory! Simply, they can charge whatever they want for the H100s, the new Grace Hopper, and the H200s that are coming down the pike. I’m confident that these margins will continue for at least a year untill competitors get their act together.

However, to assume that these margins will continue beyond that is difficult to swallow, and most of the street estimates for earnings are based on at least 52% in NPM, which if not achieved can be a huge disappointment.

So I modeled earnings at a 40% Net Profit Margin, which is similar to a big pharma company’s patented drug margin that also charges as much as the market can pay for it.

With that NPM, Earnings come down naturally; three years down the road in the 40% model, EPS is  $26 compared to the street estimate of $33. Assigning a P/E of 40, that gets us to $1,030 from today’s price of $725 or an annualized gain of 12%. And if the street is correct, we’re looking at 40*33 =$1,320 or an annualized gain of 22%.

The counter argument to the lower margin thesis is – Nvidia can lower prices and sell more, and at some point this is likely to happen – the overall growth doesn’t reduce – especially if you’re changing the whole paradigm of accelerated computing replacing the way data centers are built now.

At the moment, I’m not planning to add any more, my exposure to Nvidia is already very high, and the long-term thesis doesn’t change.

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Semiconductors

Nvidia (NVDA) Update: $715-$720 – Taking Profits While Maintaining Long-Term Outlook

source:nvdia

Nvidia (NVDA) $715-$720. Planning to take profits, and reduce position by about 10% this week.

Nvidia reports Q4-FY24 earnings after market tomorrow, 02/21 and expectations are high for an impressive beat and raise for FY2025. Nvidia has a January year-end.

Nvidia is the largest holding in my portfolio and I need to reduce it a bit to keep my risk rules and parameters intact. I also believe that expectations are a little too rich for my liking and anything less may be hammered, instead of the usual earnings pop there could be a selloff. Nonetheless, it remains a great investment over the long term and I wouldn’t sell more than 10-15% of my position. Just pure profit-taking and risk control.