A “macro event.” That’s how Nvidia’s Q2 results were billed by the financial media and analysts alike.
In the wake of the company’s stunning quarterly report in late May, Nvidia became the face of the generative A.I. revolution, the poster child for 2023’s unexpected US equity rally and, according to some, a harbinger of an epochal productivity boom with far-reaching macroeconomic consequences.
Is the hype overblown? Yes, almost surely. But not in the context of Nvidia’s potential to make or break the stock rally, which ran into a wall this month amid a steep rise in US yields.
On Wednesday afternoon, Nvidia said revenue for Q2 was $13.51 billion, up almost 90% from Q1, more than double the same period last year and $2.5 billion more than the company guided for in May. That guide, you’re reminded, was 50% above consensus at the time.
The company’s revenue outlook for Q3 was astounding. Sales this quarter will be $16 billion plus or minus 2%, Nvidia said. That was $3.5 billion better than the Street expected.
Jensen Huang didn’t miss the opportunity to gloat. “A new computing era has begun,” he declared, in characteristically enthusiastic remarks accompanying the results. “Companies worldwide are transitioning from general-purpose to accelerated computing and generative A.I.”
The revenue breakdown was $2.49 billion for gaming, $10.32 billion for data center and $253 million for automotive. Only the latter missed. The data center beat was enormous — consensus was looking for $7.98 billion. Adjusted gross margin was 71.2%, more than 100bps ahead of estimates.
“During the quarter, major cloud service providers announced massive NVIDIA H100 A.I. infrastructures,” Huang went on. The company’s A.I. is coming to “every industry,” he said, citing enterprise IT and software partnerships.
Adjusted EPS of $2.70 beat easily. Consensus was $2.07. GAAP earnings rose 854% YoY and more than tripled sequentially. Free cash flow of $6.05 billion was a mile ahead of estimates. Nvidia also announced an additional $25 billion in buybacks.
I suppose there’s some scope for a “buy the rumor, sell the news” dynamic to play out, particularly given the almost unfathomable run the stock’s already had in 2023. And it’s always perilous to draw conclusions before the call.
Still, it’s difficult to imagine anyone describing these results as disappointing. The bar for an encore was high, and if this doesn’t count as clearing it, I’m not sure what would.
Huang summed it up. “The race is on to adopt generative A.I.,” he said.
NVDA has proven that at least this year they can print money better than any central bank on the planet, impressive. I’m done trimming my position every time it doubles inciting worries my portfolio is too exposed to a single name, can’t but more but can’t sell it either, too risky either way.
It seems that everyone who wanted to buy Nvidia already purchased Nvidia before earnings.
I am waiting on the next group of buyers- who I think will be hedge funds who decide to take oversized positions in Nvidia because of the massive increase to sales and profits guidance. Until they start buying, the stock price will likely remain where it is. ( ok- I will wait!).
I won’t be surprised when I read that Buffett (Todd Combs) took a big position in Nvidia.
Remember when no one thought Buffett would own Apple?
Adventures in AI BOT-Land:
1) Early this month I was flying home from Phoenix. “Due to last night’s rain” my flight suddenly was pushed back by 90 minutes, which meant I’d probably miss my connection. As I waited in the customer service line I wondered if there was another flight after my connector in case I missed it. Then I decided to try the BOT. It seamlessly rebooked me onto another flight to a different city. Thankfully I was called over to the help counter. I told the woman my story and she looked at it and said “That’s funny. It looked you on a flight that is scheduled to arrive 45 minutes after the connecting flight is due to depart. The living human being cancelled that and suggested I risk the original itinerary (which actually worked out).
2) Later this month I changed cellphones. Just the phone, not the number. That opened Pandora’s box. My Google Ads account required 2FA to add a campaign. Google kept trying to text the code to my old phone and my wife’s wretched iPhone. Tech support turned out to be 100% bot-driven with no option to get human support. The bots kept sending me to a useless FAQ page and finally onto an online support forum which proved to be absolutely useless. Luckily, I figured it out by myself after a lot of work but geez, isn’t Google an AI pioneer?
3) Yesterday I needed to change a setting in a ATT Mobile account because one member of the group was being harassed by a stalker. Easy-peasy? NOT! Once again they required 2FA to log in. And once gain they were incapable of sending a text code, this time to my wife’s phone. EVENTUALLY I reached a human agent via chat. She tried to help but the chat function suddenly became “Unavailable, please try back later.” There was a three hour wait for human tech support. I’ll be pulling the plug on ATT after that experience.
4) That night I attempted to book an international flight on the UAL website. There was a really good option. But when I went to pay for it I got an indecipherable error message and was asked to “please try again later.” Once again, all support was via BOT which just wanted to send me unhelpful FAQ links. There was a talk to a human agent button, which asked for a $50 charge. I did not book the flight with them.
5) These are just a few examples of the near- future when the only help you can get is via AI chat bots. I’d wager that some smart companies will start to offer human help just as many used to when there was push-back against using offshore call centers. I sure hope so!