Remy Blaire welcomes Melissa Otto, the Head of Visible Alpha Research at S&P Global Market Intelligence, to discuss NVIDIA’s recent earnings report and its implications for the company’s future.
Melissa provides her insights on the earnings report, noting that while the numbers were strong, there was a lack of clarity regarding the margins for NVIDIA’s data center business moving forward. This uncertainty may have contributed to the stock’s volatility. She emphasizes the importance of understanding the profitability of NVIDIA’s next-generation chips, particularly Blackwell and Rubin, as the market anticipates a gross margin increase in the data center segment from 74% this year to 76.3% in 2026.
The conversation shifts to the sustainability of these projected margins, especially in light of increasing competition and rising costs associated with AI build-outs. Melissa references comments from NVIDIA’s CEO, Jensen Huang, indicating that demand remains strong, but the profitability of that demand is still uncertain.
As they explore NVIDIA’s valuation, Remy and Melissa discuss the wide range of earnings estimates for the upcoming year. Melissa suggests that actual earnings could vary significantly based on the company’s margin performance in the next quarter.
Towards the end of the episode, they touch on the broader implications of the nearly $400 billion expected in AI capital expenditures this year. Melissa expresses uncertainty about whether this level of investment is justified or if the industry risks overbuilding, likening the current situation to an arms race among cloud service providers.
Finally, they examine NVIDIA’s current price-to-earnings (PE) ratio, which stands just below 45, and discuss what to expect as they approach 2026. Melissa emphasizes the need for more clarity on profitability and earnings growth to provide a clearer picture of NVIDIA’s valuation trajectory.