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EC SD | They had a very strong earnings report. The biggest concern in August was a rumored delay in Blackwell, their next generation chip. They squashed that rumor in the call... Also met all of their very lofty targets for revenue and earnings with a continuation of over 100% annual growth rate. They maintained unbelievable margins of 75%, so that shows a continued enormous product backlog and highly competitive products and pricing to maintain these margins. They grew sales in their legacy business of gaming, their legacy business of high performance computing, their new business of high speed networking, and of course AI, which is now the number one segment. Zero debt, enormous positive cash flows, and a new $50 billion stock buyback program, using those operating cash flows, are all positive...
Their customers want more and more - more computation capability, more density, more energy efficiency, and more for the money. The next generation chips deliver on all of that. CEO says there is about $1 trillion of data center hardware installed today, and all of it will be replaced over the next couple of years. NVDA has the leading products and will have a significant portion of that $1 trillion.
Then the replacement cycle will start again in 3 short years, with another new generation of chips that makes the current one (hopper) and next generation (blackwell) both obsolete. So another $1 trillion of data center spending in the out years. This cycle will likely repeat for at least another decade or maybe two, unless some black swan event, like WWIII, interrupts its trajectory.
The next earning report has less ambitious growth targets (about 10% quarter over quarter growth). This "slowdown in growth" was all the bears needed to jump in and try to crush the stock. The quarter after next is where NVDA is promising billions of dollars in new sales of blackwell chips, on top of their existing products. The market will anticipate this at some point, and NVDA stock will resume its upward movement to new highs. I think in next earning report they will have very ambitious targets for the quarter after the current one. They will have a new high-margin revenue stream with blackwell in addition to the chips. They will be providing management services on blackwell to the end customers. This is billions of additional revenue annually with modest expenses because they designed this into the new blackwell chips.
Will NVDA stock go to the moon? It seems that would be impossible for any company's stock. Most professional analysts are projecting $150 to $200 within a year from now. I tend to agree with that... | |
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Nvidia
