Video posted another blowout quarter reporting $46.7 billion in revenue, up 56% from a year ago.
Now demand for AI computing power continues to skyrocket, but shares dipped in after-hours trade with investors reacting to the slight miss in data center revenue.
Now the company continues to brush off concerns over its China business.
Which has been hit by US export restrictions.
Well, joining me the morning after Nvidia earnings is Melissa Otto, head of visible Alpha Research at S&P Global Market Intelligence.
Well, Melissa, good morning.
First and foremost, I do have to ask you if you went to a watch party or you had your own, and what the reaction was like if you didn't have one.
Good morning, Remy.
It's great to be here discussing Nvidia the day after.
Uh, it was certainly an interesting quarter.
A little bit lackluster compared to previous quarters where we saw a significant upside surprise, particularly in terms of the outlook.
One of the challenges with a company with with Nvidia is that the expectations have really become quite high for the company, and the magnitude of the upward revisions continue to decline.
So the question's going to be what is really going to give them that outsized growth that could potentially deliver alpha going forward.
Yeah, Melissa, there are a lot of memes that were circulating yesterday on social media ahead of that earnings report about the importance and the focus of Nvidia on the rest of the market.
But the company's data center segment, which does drive most of its AI chip sales, which grew by over 50% to $41.1 billion it was still shy of Wall Street expectations.
So what's the reality of this result?
Yeah, the reality is that expectations have been high and are continuing to grind slightly higher, and it's becoming more challenging for the company to deliver an outsized surprise.
And so even though fundamentally the company is strong, the expectations are higher, and it means that A lot of those positive fundamentals and expectations have more or less been priced into the stock.
Yeah, Melissa, you mentioned the stock Nvidia stock has nearly doubled since April, and that is being powered by aggressive AI infrastructure investments from some well known household names like OpenAI, Microsoft, Alphabet, Meta, and Amazon, and they are all racing to build more powerful AI models.
So how are you looking at the upcoming quarters and tell us why?
Yes, I mean, I think for the rest of this year.
Visible Alpha Consensus has not seen much increase in the overall sales of the company.
I think those, those numbers are remaining fairly stable.
However, we are seeing uh expenses grind upward as the company guided to a higher expense, more investment this year.
And then I think what the street is ultimately thinking for 2027 is that Those investments will pay off and deliver higher sales in 2027.
However, between now and next year, The the stock could more or less trade sideways unless we see a meaningful catalyst.
Yeah, and Melissa, I think caution is the key word here moving forward if the first half of 2025 is any indicator, but when it comes to caution, where are you cautious and why?
Prolies on the costs, you know, how they, uh, their margins have really ratcheted up over the past several years.
We've seen really nice margin expansion coming from data centers, and that's, that's been attributed to, uh, their solutions and products around transforming data centers to accelerated computing to support generative AI.
And I think as they invest in that and think about.
Their new products like Ruben and Blackwell and as Blackwell ramps, those costs could increase.
And so are they going to deliver the same margins and the margin expansion that we've been enjoying for the past several years.
So that's one of the big questions.
The second question too is around total addressable market.
One of the things that has been remarkable about Nvidia is that it has Just expanded so much in the past two years, and the question really becomes how much more can it truly expand and what additional new markets, new growth could the company experience and or is it largely priced in at this time and I think that's a tension that the market is trying to grapple with.
Yeah, I think those unanswered questions are some of those things that keep us up at night, but finally, before I let you go, we have less than 60 seconds here, but politics that do play into Nvidia stocks.
So what kind of impact from China do you expect to see moving forward?
It's tough to say.
I mean, Nvidia has exposure from an end market perspective, a supply chain perspective to China, and They came out on the call and they said, we are not assuming any um age 20.
Um, sales for the next quarter, but if, if there were, if they were to come into the mix, it would be somewhere between $2.05 billion dollars.
We could extrapolate that going forward, but it's a very fluid nebulous situation at the moment, so um.
You know, we're just kind of keeping an eye on it and monitoring the situation carefully.
I mean, Vydia is certainly not alone in this situation.
OK, Melissa, well, we will have to leave it there, but as always, thank you so much for joining me and as always, thank you for all of your insights.
Thank you, Remy.
