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Fountainhead Investing

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Tag: Nvidia

Categories
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%.
Categories
Cybersecurity Semiconductors

Strategic 2024 Investment Opportunities in Cybersecurity, Technology, and Semiconductors

Here are ETFs that mirror the growing Semiconductor, Cybersecurity and Technology sectors, they have 4 to 5 Star ratings from Morningstar and have done exceedingly well this past year – over 40%. Which is a great performance but a drag going forward, because we’re entering at fairly high levels and very little chance of those gains. Nonetheless these have performed in the mid to high teens per year over a five year period and some have over a ten year – basically the underlying stocks are strong so in the long run, as we can see from their consistent performance.

Most Important: Spread your buying out in installments, on declines, anything we’re buying in 2024 is priced above their mean so we want as much of a bargain as possible.

Cybersecurity

CIBR – cybersecurity, mostly large cybersecurity companies, has the biggest names like PANW, CRWD, OKTA, FTNT etc, a good proxy for cyber security, 

HACK – also cybersecurity, some small companies, but it has companies that specialize in military grade products, which is a bit of an advantage.

Technology

VGT – VGT is part of the Vanguard family, very well regarded and has all the biggest names in tech, half of the M-7, several cybersecurity companies, huge returns –  even the 10 year return is like 18%, going forward if big tech performs this fund do very well. But given how well it’s done again don’t expect too much, anything in the 10-12% range per year for the next 5 should be good.

Semiconductor

SOXX – Largest semiconductor ETF also very successful, having Nvidia as a large holding will do that, but there are several semiconductor companies that haven’t done as well, which can be a drag. But that is common for a sector or any mutual fund or ETF, there will be mediocre and weaker companies, but they also tend to be less volatile, it’s not all bad.

Categories
Enterprise Software

GitLab’s Growth: Strategic Partnerships, High-Demand Offerings, and Alphabet’s Investment

To be sure, Alphabet still has a small minority stake in GitLab — although its recent regulatory filing indicates its investment is a “member of 10% group,” meaning that Alphabet’s GV is working with a consortium of investors that collectively have a more-than-10% stake in GitLab.  

Funnel business to Google Cloud, the way GitHib is doing it for Azure.

NVIDIA selected Gitlab Geo to tackle scalability and security issues, enabling their remote teams to operate with greater efficiency and effectiveness. This implementation reduces the duration required for cloning and project management, facilitating smoother operations.

GitLab’s Ultimate tier witnessed remarkable growth in the fourth quarter of fiscal 2024, with 50% of Annual Recurring Revenue (ARR) attributed to this tier.  – Kind of reminding you of Apple’s priciest I-phones getting the most demand.

Categories
Semiconductors

Micron (MU) Rating Upgrade to Buy: Strong Earnings and HBM Demand Drive Optimism

source:micron

Micron (MU) Rating Upgrade to Buy from Hold, $100.

Results expected this afternoon were very good, and I am more optimistic about the guidance. I was hesitant to add or recommend buying because it looked overpriced compared to its historical average and it had doubled in the past year.

Nvidia’s comments on needing more high bandwidth memory (HBM) vendors like Samsung, suggest the Micron is more likely to have challenges meeting demand. Unlike the past year when they had to discount inventory.

https://www.barrons.com/articles/micron-technology-stock-earnings-d6cd03f9?mod=BRNS_ENG_NAS_EML_BULLETIN_AUTO_NAH

With this beat and these upgrades from Wall Street analysts in Barron, I would start buying.

“Micron is likely to report continued soaring demand for “high bandwidth memory,” or HBM—parts that combine multiple DRAM chips to improve data-processing speeds.

TD Cowen analyst Krish Sankar wrote in a recent research note previewing the quarter that when it comes to Micron, “HBM remains the centerpiece of attention.” Last week, he lifted his target for the stock price to $120, from $100. He said there is a “potential scenario” where the stock can reach $150, for a gain of more than 50% from current levels.”

For the May quarter, the Street is projecting revenue of $5.98 billion, with an adjusted profit of 8 cents a share. Analysts expect the rebound to continue from there. Estimates for the August quarter now point to $6.86 billion in revenue and an adjusted profit of 81 cents a share.

FQ3-24 

Revenue 6.6Bn Expected 5.8Bn

EPS $0.17 Expected $0.08

FQ3-24GAAP(1) OutlookNon-GAAP(2) Outlook
   
Revenue$6.60 billion ± $200 million$6.60 billion ± $200 million
Gross margin25.5% ± 1.5%26.5% ± 1.5%
Operating expenses$1.11 billion ± $15 million$990 million ± $15 million
Diluted earnings per share$0.17 ± $0.07$0.45 ± $0.07

Wedbush analyst Matt Bryson wrote in a recent research note that recent trends in prices for both DRAM and NAND memory chips suggest Micron will beat its guidance for the quarter. Bryson, who has an Outperform rating on Micron shares, said he expects positive commentary from the company on the outlook for HBM demand.

“Since last summer, management has provided consistently optimistic commentary around anticipated progress with HBM in light of the technology being a derivative of their highly successful standard DRAM nodes,” Bryson writes.

Meanwhile, analysts say the balance between supply and demand has stabilized following a supply glut that spanned multiple quarters.

“Customer inventories have largely normalized, demand conditions across markets appear stable, and supply growth remains muted,” Raymond James analyst Srini Pajjuri wrote in a research note previewing the quarter. “In addition, HBM is a significant secular driver that could add $1.5-$2 in incremental EPS at the next peak.”

Pajjuri maintains an Outperform rating on the stock.

Categories
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.

Categories
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.

Categories
Stocks

AMD’s Resurgence in the AI Market: Is It Time to Invest?

source

AMD has been mostly relegated to second tier status because of Nvidia’s massive leap in AI related data center revenue, which catapulted it from $27Bn in sales the previous  year to $57Bn in 2023, this year and an estimated $90Bn in 2024.

However, AMD is a scrappy competitor and I have a lot of respect for Dr Lisa Su, who’s transformed this company from a commodity CPU/GPU semis supplier to game consoles and PC’s to a solid competitor in the data center segment. Most of Intel’s market share losses can be traced to AMD’s strengths!.

While Nvidia is likely to continue getting a lion’s share of AI GPU revenue for at least the next 2-3 years and in fact when AMD guided to about only $2Bn in AI/GPU revenue for 2024, during their last earnings call in Oct,  I felt it was too little to buy AMD at that time. Besides the hardware, Nvidia’s moat is CUDA, its operating system, which really makes its GPU’s so much more powerful. I didn’t see AMD getting much traction on that account.

However, that was a mistake as it turned out to be a conservative estimate.

This is from UBS analysts:

Recent channel and customer checks confirmed their view that AMD has a firm demand commitment for more than 400,000 MI300A/X units for 2024, the analysts said. This is a number that is fairly consistent with where the analysts have seen demand since last summer but they have been wary of double ordering and unsure of supply.

The analysts added that after having gone back to several customers and suppliers, they are more confident that these units are real and AMD now has sufficient Chip-on-Wafer-on-Substrate capacity to do over 10% the volumes of Nvidia (NVDA).

*Even assuming a very conservative average selling price (which could be as high as $20,000 or more for some customers), this suggests $5B for data center GPU revenue is a pedestrian target for this year. Even this implies AMD exits the year at a *run-rate which could be close to $10B per year* with AMD still likely to grow GPU units quarter-over-quarter through much of 2025, the analysts added.

AMD has already moved up from $135 this month to $177 and it lost a little bit after Intel’s poor guidance. I’m going to start buying this slowly – knowing fully well that I’m late but I do believe in its long term story and the $10Bn run rate is an excellent number – If we believe in the AI story and the resulting surge in its building blocks, there there is no way only one company, Nvidia can supply to the entire market – AMD will get a decent foothold. I’m anticipating +$8 in earnings two years out, that should be priced at 30x or $240, which is still 36% higher than today’s price, nothing to be sneezed at.

Citigroup (NYSE:C) stock rose 1.8% in Friday premarket trading after the bank said it expects 2024 revenue to increase to about $80B-$81B from $78.5B in 2023, driven by gains in treasury and trade solutions, securities services, a rebound in investment banking and wealth, and lower partner payments in retail services. The revenue outlook excludes markets and divestitures.

Net interest income, excluding markets, is expected to decline modestly as global interest rates fall. Citi (C) expects mid-single-digit loan growth, driven by its card business and modest operating deposit growth, it said in its earnings slides.

Citibank’s adjusted earnings also beat expectations, but they expect only 2% revenue growth for 2024 and a modest decline in NII. Their allowance for losses was $397 Mn so no dire warnings there either.

Wells Fargo also beat adjusted earnings and revenue expectations but is more pessimistic for 2024. It expects net interest income to be about 7%-9% lower than 2023’s $52.4B level on lower interest rates, an expected decline in average loans, and further attrition in Consumer Banking and Lending deposits. Their provision for credit losses was $1.28B, higher than the other two but below expectations. *Q4 net loan charge-off, as a percentage of average total loans, of 0.53% vs. 0.36% in the prior quarter and 0.23% a year ago.*

Percentage of loans charged-off is a key measure to monitor; in Wells Fargo’s case it was double of the previous year’s – will need to keep a strict watch on this.

Categories
Semiconductors

Super Micro Computer (SMCI) Earnings Report: Key Indicator for AMD and Nvidia’s Performance

source

Super Micro Computer (SMCI) reports this evening, after market close. If you recall, Super Micro had shot up from $300 just two weeks back to the $490 it is now, because of its revised guidance  – it too had its Nvidia moment!

Second-quarter anticipated sales now expected to be between $3.60 billion and $3.65 billion, which was a significant increase from the previous forecast of $2.70 billion to $2.90 billion. The company anticipates an improvement in adjusted earnings to the range of $5.40 to $5.55, up from the initial estimate of $4.40 to $4.48. 

This new guidance handily surpasses analysts’ expectations for the second quarter, set at $2.84 billion in revenue and earnings per share of $4.55. At midpoints, these revised projections indicate a 29% rise in revenue and a 24% increase in non-GAAP net income compared to Super Micro Computer’s earlier guidance.

I’m more interested in SMCI’s results as a good indicator for AMD and Nvidia (Nvidia), since they are the largest supplier for scalable rack systems for the data center GPU’s. If they overshoot even this revised estimate, I would look at AMD more closely.