Nvidia’s Greatest Earnings Yet!! Why I’m Even More Bullish on AI

Welcome back to another episode of What the Chip Happened? What I believe is the greatest semiconductor and AI podcast. Now, on today's episode, we have to talk about Nvidia's earnings. They, to me, are the greatest earnings I've seen since this AI cycle started, and the stock is up roughly 4.7%. Now, if you guys did watch my pre-earnings video, I did talk about certain things that I wish Nvidia would answer, and either they listened to the call or I'm just a fortune teller, but we got those answers. And I think that's what made a huge huge difference. Let's take a closer look in today's episode. Because my birthday is coming up and because earnings were amazing. Right now for the next 7 days I am offering 40% off the community. This what the chipappen.com. This is a community where you get deep dive reports. I'm going to be doing a massive massive report on Nvidia. You also get exclusive live streams that you're not going to get anywhere else. We talk for about an hour discussing anything the membership wants to look at. We talk about we share so much deep research into the semiconductor and AI industry and you are going to want to check it out at whatthechipappen.com. Again, because of my birthday and because of the great earnings, I am offering 40% off. This is the best offer of the year. So, like I mentioned, Nvidia's earnings super super strong. This is a company that I've owned for a very very long time. It's one that has completely changed my life. Now, Nvidia's revenue was $96 billion this quarter versus 46 a year ago. So, it was over a 100 yearover-year growth. That's insane. A company growing over 100 in those types of numbers. It's not something you see pretty often. Now, what I thought was pretty interesting is the data center market is broken down between two players, right? The hyperscalers and your AI clouds, your industrial and your enterprise. Your hyperscalers were about 49 billion. The other one was 40 billion. and and and the main reason this happened is because one of the customers that used to be in AI clouds has shifted to a hypers scale customer. So it is interesting to see both are growing extremely well and the market is not driven by just the big four or the big five. It's driven by a lot of other companies as well. The other thing is free cash flow, right? $21 billion in free cash flow versus 13 a year uh a year ago. capital return to shareholders 26 billion mainly in share repurchase but you also have a strong dividend compared to a year ago. So those are the very top level numbers of Nvidia. Now in this channel you're not going to get I think top level numbers only tell like a third of the story. I think what you hear from commentary, what management says during the earnings call, a Q&A session, that tells you a lot more about the business and the long-term opportunity, especially for a company like Nvidia where AI innovation needs to continue to move forward. So, I I in in my kind of pre-earnings tweet, I posted that there are two topics that I think are going to be the biggest discussion points during the earnings call. The first one was OpenAI just released a new Jalapeno chip or a new chip and it's called Jalapeno. It got very popular in the social community base. So I personally believe that a lot of analysts were going to push this. I didn't think it was important but I wanted to hear what Nvidia said to it and I I thought that analysts were going to push it and they did. And the second is commitments, right? this was going to be the most important one and I'll explain that a little bit little bit but Nvidia kind of with the ASIC chip of Jalapeno or just any AI chip in general they Nvidia says that building a chip is not even half the battle right it's not even half the battle the other the more important part about developing a chip is that this having the ability to scale it to a data center or a massive data center at at one scale but more importantly speed so the supply chain the rack design the volume ramp timeline and much more is equally as crucial as having a good chip and Jensen says go ahead do whatever you want a lot of these get cancelled you even if after great benchmarks they get cancelled and I'm very confident in what our team can do and that our team will provide the best total cost of ownership so it was asked a few times but that was pretty much the answer says it comes with the business competition is going to come and we're just going to continue to progress further the big thing with us is we do have a massive balance sheet and with that massive balance sheet we will be able to lock in a lot of supply and be able to move this semiconductor industry in the way we want to and I think that's a huge huge moat but the second thing that I thought was going to be very important was commitments this to me was the most important thing I mentioned I am a huge AI pill right I'm really bullish in the AI market and I do believe demand for compute will continue to grow faster than supply at the same time the supply chain from raw materials to land power shell is limited right now. So, Nvidia has to lock in a lot. But if we see a huge jump in commitment on the financials, I also want to know a better visibility than 1 trillion combined revenue from 2025 to 2027 on Blackwell and Ruben. So, I pretty much said Nvidia, if you're going to give us more commitments, a lot more commitments, you have to give us the visibility. Now, when Nvidia came out with their press release, there were unfortunately a lot of stuff about commitments. secure critical components needed to meet demand for the next several years. Our commitment increased from 119 billion last quarter to 279 billion primarily related to the pcurement of memory. So Nvidia is making these long-term commitments for memory right now. But regardless, what is the first thing we're seeing? That commitment jumped dramatically dramatically from a quarter ago, right? Supply and then there's other commitments that they make, right? Cloud service agreements. For those that are not familiar, Nvidia uses a lot of cloud solutions for their research purposes and that's this right here. Then they also have data center leases that have not commenced and they will progress over time. They have that there. Then they have equity investments that they're making, right? They're making all these investments in different companies and then they have capital expenditure. At the end of the day, that commitment overall with all those things included that are just for Nvidium was about 366 billion total, right, for 2030. from 2027 to 2032 and thereafter, right? This is a calendar year act calendar year beforehand though because remember their fiscal year is like a year ahead. But but that wasn't it, right? They also had additional commitments. They had about $56 billion in commitments for other AI cloud agreements, right? This is the one where they do backs stop on any AI cloud solution. So they had 366 year 56 billion so about 4 and something billion there already. And then they had guarantees for these massive land power shells. One of them really coming with that open AI and that's about 108 billion. So in originally when earnings came out the first thing we saw was Nvidia is saying that they're on the hook of somewhere around half a trillion dollars in commitment and you did see a negative price action on the stock right and and and unfortunately with the press release we didn't get actual guidance until the earnings call. But if you mention, and this is what I've been saying for very, very long time. I know analysts have been pushing this in the last week, but if you go back a month or so, this was going to be the biggest topic and the thing that moved the stock. If you're going to give me supply chain and crazy commitments, you need to give me visibility. And they ended up doing that, right? I I posted here, Nvidia, the market is worried when the stock price was down around 440 prior to the re to prior to guidance that the market is worried about the crazing commitments. But I'm just thinking, what kind of visibility does Nvidia have to make these commitments without blinking, right? Half a trillion dollars with obviously multi-year time span, but half a trillion dollars pretty much in commitment. What kind of visibility do they have? And then earnings started, right? earnings started and the one of the first things they mention is we expect to grow revenue by approximately 70% physical 2028 which is calendar year of 2027. This is a supply constraint outlook. That is insane because then I went on to do kind of some quick math. So analysts for this year are expecting Nvidia to do around $400 billion in revenue. I actually think it's going to be further than $400 billion in revenue. But if you do that $400 billion in revenue and you grow it to 70 next year, that $400 billion is actually closer to $680 billion in revenue. The consensus was somewhere around $570 billion. So that's a beat of over 100 billion of what the market was expecting. And that's when the whole story shifted for Nvidia. That's when you saw the stock price go up. Like I mentioned earlier on, if you're going to give me those crazy commitments, you better give me a better visibility. And they did that, right? And that's when the stock price moved because you're doing $680 billion on the supply constraint market next year. That is insane. I understand now. I'm not worried about those commitments, right? I am not worried at those commitment at all because you gave me that disability. And the most important part about this is this is on a supply constraint market. This is what they feel comfortable guiding based on the supply chain lines that they see right now. But obviously obviously things are moving in the supply chain industry. Certain things are turning on. They can actually allocate more more revenue or or more supply chain. So this actual growth can be higher than 70. I personally believe it's already higher than 70. Nvidia is known to be a little bit more conservative on their numbers and they tend to be. So 75 bill uh 75% 80%. Now you're talking about $700 billion plus in revenue for next year. I don't necessarily think that's scary and to me that's overall bullish for the whole AI industry. It's also good to hear that they are supply constraint. Now some other things that I thought were interesting and I again I just want to share more of like the key alpha information right not everybody can look at the numbers and say that's wild all gross margins blah blah blah. I think what's very important to understand for this whole AI ecosystem, it's what's happening during the earnings call. The other thing that we heard was Capix is going to be crazy next year. Nvidia mentioned that capix by the top five hyperscalers is expected to be 800 billion this year in 2026. That's expected to hit $1.3 trillion in 2027. I I can't imagine the type of capex numbers we're going to see by the hyperscalers or guidance they're going to give us in the next few few quarters or even the next earnings right but $1.3 trillion in 2027 in capex just by the top five right just the top five that's not including the neocloud players that's not clinging the enterprise players what type of money is being spent in this AI ecosystem and this is why I feel like I'm not bullish enough in the overall industry so this earnings was what I the greatest earnings Nvidia has done and even without the price reaction right 220 is nothing crazy it's only up 4% it's not like it's up 10% right but uh it it did give me this very confidence that the whole AI ecosystem is going to benefit right because $1.3 trillion next year in capex this type of revenue guidance that they're giving Nvidia is not just one product right it's not just one chip you this impacts the whole industry it impacts TSNC and it impacts the equipments players like applied materials like ASML, like air test technology. It impacts the the advanced packaging players like I mentioned the memory players, the optics players, the networking players, it impacts the server makers, right? There's so much that this impacts the CPU players, right? The list goes on and on and on, right? Cuz not all this capex is going to go to Nvidia. So, it gives me this very strong confidence in my semiconductor and AI companies. And I truly believe I am not bullish enough just yet, right? These numbers and I feel like 2028 I'm gonna say that again, right? When we get 2028 numbers, I'm gonna be like, "This is insane. This is insane." Now, there was one red flag. Nvidia did mention that there is going to be a margin destruction. And bears were right. Margin in fiscal year 2028, which is next year, is going from 75 to 73% due to memory prices. Now to me this is the destruction of margins that the bears were talking about is extremely scary. Obviously sarcasm right here this is to me this is an amazing scenario where you're getting memory that's increasing by 80% 60% right we've seen micron say quarter over quarter memory prices are increasing 60% 70 and all those memory prices increasing yet your margin hit only took about a two percentage point decrease. I think that's amazing, right? Some companies were probably impacting more and that's that Nvidia ended up locking in a lot of supply. They mentioned a good portion of this supply is primarily procurement for memory. So Nvidia already knows what's up with their memory solutions and the type of memory prices that they're going to pay. So March is still staying at a 73% to me is extremely extremely positive. Now the final take I want to have here and like I mentioned if you do enjoy my takes. Not just top level numbers, it's more of what's happening. Check out what thechipapp.com, right? That is my personal community. 40 off the next 7 days for my birthday and for amazing Nvidia earnings. I think the market deserves it. It's less than an Nvidia share, right? And I believe the alpha I provide there is worth more than an Nvidia share, but that's just my overall thoughts. I'm biased because it's my community. Now the final thing that I I really grabbed out of this earnings call and I I I will be doing probably a lot more earnings or more review on Nvidia because we did get a lot of information. We got things about Amazon. We got things about the memory space. But let's find this final top here is to me coreweave Ian Nebas are just getting started. Jensen said it right that right now they have great visibility upstream and downstream. is the case that and it's the main reason they never forecasted or never guide it to a year in advance but they mentioned their demand is much greater than 70 our supply allows us to confidently deliver 70 and we are going to continue to work with our supply chain to increase that. So if you're confident about 70 in your supply constraints and that means demands for chips continue to outstrip supply what does that mean for revenue per megawatt I think it's extremely bullish for revenue per megawatt so to me if we are going to be in a supply constraint space anybody who has active compute that they can sell is going to be able to sell it either at a great price to be able to sell it in no time so I still truly believe that companies like Core Weave, like I ran, like Nebas, even though I don't own that, are just getting started in this AI story and it's going to get a lot crazier next year. So, I'm I'm pretty excited. I'm going to be looking at certain stocks tomorrow that might have gone up or down during this recent sell-off and try to even add a little bit more and where I can't because I really do believe the AI industry and the AI market is still in early ages in this AI story. So, I hope you guys enjoyed the episode. Let me know in the comments below if you're buying anything tomorrow. We do have Iran and Marll earnings tomorrow which I think are going to be very bullish in my opinion. Even if the stock price sucks, I think long-term both of those are great winners in my portfolio. Take care. Have a good day.