Nvidia’s Huge Q1

[Darthtaco]

Good ol’Nvidia doing Nvidia things.

They reported quite amazing Q1 earnings on Thursday. They are thriving in the face of Corona, which I was expecting. Turns out many people (like me) needed to update some home computers in light of increased kids at home and WFH and opted to get a more future proofed system with a good graphics card. This sustained high gaming segment sales.

But the real story is data center had an absolute monster quarter. T4 inference is kicking butt and they launched the next generation Ampere chip the A100 which offers up to 20x performance over Volta in certain workloads and offers the greatest diversity of any chip ever made. There is no competition for this data center chip and will not be for years and then Nvidia will be on to the next AI processor. AI and HPC are growing up in the age of Nvidia. It’s their market. This chip is so powerful it is the first AI chip designed to be divided up into up to 7 individual instances. This is great for hyperscalers to put in their DCs to then rent out “space” on each chip.

This new chip, Nvidia’s first 7nm, shipped in Q1 and contributed to revenue. Mellonox deal closed current quarter (Q2) so does not contribute to these numbers.

Q1 (non-GAAP)

Rev - $3.08B (+39%) beats by $80M
EPS - $1.80 (+104%) beats by $.12
GM - 65.8%
Net Income - $1.12B (+106.3%)

That’s a 36% profit margin. Printing cash.

Big story is that data center segment

Rev - $1.141B (+80%) <—Amazing

There will be several more quarter of hyper growth in data center as the A100 really ramps. Ampere is a bigger game changer than Volta was. And HPC and AI training is in high demand with all the cloud compute going on and all the research being done. They are having a huge impact on research of all kinds for Corona. Cures, vaccines, data research and what I thought was the coolest was imaging AI for detecting lung irregularities in patients.

Gaming is strong. Grew +27% in seasonally weak Q1 quarter.

They will have some headwinds in automotive. Autonomous cars are obviously not as hot an item for car companies and ride sharing platforms who are struggling to survive and depressed car sales means not as many infotainment chips too. This segment is expected to be down 40% qoq next Q. But it’s the smallest segment anyways.

Guidance is for $3.65B +/- 2% or about $3.7B on high end.

With no beat that’s 44% rev growth yoy.

Mellanox grew 40% to $428.7M in most recent quarter and will be contributing to Q2 numbers (partial quarter). Deal closed on Apr 27. So we are looking at about 2 months of contribution. Haven’t looked at CC yet so maybe they broke out the numbers. Luckily for Nvidia Mellanox is growing as fast as Nvidia and also has a mid 30’s profit margin, so the acquisition will be perfectly accretive to performance.

I re-entered at a 5% position last November. Stock is up about 80% since then.

Presentation:
https://s22.q4cdn.com/364334381/files/doc_financials/quarter…

Earnings Release:
https://nvidianews.nvidia.com/news/nvidia-announces-financia…

CFO Commentary:

https://s22.q4cdn.com/364334381/files/doc_financials/quarter…

Darth

[hmcproperties]

“I re-entered at a 5% position last November. Stock is up about 80% since then.”

@Darthtaco

Thanks for shining the light on one of my unkept secrets. I picked up a fairly good sized starter position in the whacky pullback of December 2018; currently up 167%, continued to add during the Growth Rotation of 2019; currently up 135%, and then again during the Covid Correction; currently up 73%.

NVDA is one of Beth Kindig’s highest conviction companies but it is one that will require patience as she believes the full story will ultimately take 10 years to unfold:

“…it would be a disservice to my premium members to not formally initiate coverage and provide critical updates to the GPU-powered cloud and AI economy as it’s built out. I believe Nvidia will be on my short list in a decade from now. To be bold - I believe Nvidia will be one of the world’s most valuable companies by 2030. The research below organizes my investment thesis for the GPU-powered cloud and why I believe Nvidia will emerge as a clear leader.”

And, as Marc Andreessen said: "“We’ve been investing in a lot of startups applying deep learning to many areas, and every single one effectively comes in building on Nvidia’s platform. It’s like when people were all building on Windows in the ’90s or all building on the iPhone in the late 2000s.”

I understand that NVDA does not have some of the super sexy characteristics for a highly concentrated portfolio; but I consider an investment in NVDA to be one of my “set it and forget it” holdings that will be a steady performer and contributor to my portfolio’s for years to come.

True believers will have to hold on for a volatile and bumpy ride; that is the price of admission for getting on this rocket ship early at the prices you and I have purchased NVDA at over the past 18 months for the benefit of the growth to come. There will be tough times, such as the crypto implosion, the China trade wars and now the renewed tensions with China, but the loyal will be handsomely rewarded.

Just like in the great 1967 film The Graduate; but the dialogue could go something like this:

Mr. McGuire: I want to say **three** words to you. Just **three** words.

Benjamin: Yes, sir.

Mr. McGuire: Are you listening?

Benjamin: Yes, I am.

Mr. McGuire: **GPU Powered Cloud**.

Benjamin: Exactly how do you mean?

Mr. McGuire: There's a great future in the **GPU Powered Cloud**. Think about it. Will you think about it?

[ibuildthings]

NVDA has a campus near me. They have superb talent, and pay to keep them. A lot of my friends from previous and current employers work there. Every one of them I would hire in a minute. Smart and aggressive. They sell great stuff in an expanding industry. I have held shares for years.