Top Market Experts This Week On NVIDIA Stock After NVIDIA Earnings - NVDA Update

By the way, Chris Roland, senior semiconductor analyst joining us uh right now, as a matter of fact, from Susuana. And Chris, I know you're trying to track the call. We appreciate you making some time. CFO is making comments about their new product ramp being the fastest in company's history. Amazon Web Services got a bigger and bigger partnership and they see their new chip, Vera Rubin is what it's called, deployed by every hyperscaler. What do you think is moving this stock up a couple of percent after hours? >> Yeah, it's that 70% number year-over-year. I think the street was under 50. So, this clarity uh and upside with clarity uh is getting the stock moving. I think that was the big change after hours and she really said that that demand is is indicating a full doubling uh if not for supply constraints. So that 70% is after supply constraints. It's a pretty nice place to be. >> I I do not know the CFO. Her name is Colette. I do not know her. You you probably do. Uh is she seen as a conservative CFO? And I'm asking that because if she is, there's probably a bet that the 70 number could be beaten with just a little more oomph in the supply. >> I think that's right. She is conservative. We would deem her as conservative and they have a very good relationship with TSM. So, we we we'll see how that ends up. But on on the face of it, 70% is just a lot of upside that we weren't really anticipating. So this is important. So you said at least your average or the street average was right around a 50% revenue jump from now until same period next year. Correct. But we're getting 70%. >> So there's a little 20% little vig >> I think would be thrown a little icing on that cake with potential for more. Is the supply constraint 100% on the Taiwan semi side Chris or is there other factors that play into that? Yeah, that's a great question. We know memory is constrained as well. So, I would not say it's just TSM. Uh there are many places that this could actually be impacting. Uh we did see their pre- purchases go from about 120 billion to 280 billion. Uh that's in a single quarter. And they did say that that was primarily related to the procurement of memory. So, they're buying that ahead to help mitigate some of this uh on the memory side, but yeah, there could be shortages in other components just beyond front end TSM. >> Chris, I think your 275 price target suggests basically lumping on a market multiple if my math is right, but it's around there is. My question is the original question that I asked. Why does it trade currently at such a discount? Forget about the broader market, just some of its peers with growth rates that none of these people enjoy. Yeah, I think just as it's the largest market cap company out there, uh there's just limited amounts that even large fund managers can allocate towards and so it's keeping a cap on it here. Uh and then there are some bare cases that have emerged. I don't think it fully accounts for that as well. Um but that might be keeping a cap on it as well. >> Chris, when you when you look at the whole complex, commodity pricing has to come back at a certain point. And I get the supply demand issue, but when you look at tokens, I I believe you stated this as well as one of your points, down 40% year-over-year. Does that affect the story in AI, in chips, in the semiconductor space? >> I I'm unfamiliar with tokens down 40%. And in in my estimation, we're just up and to the right. Uh so I'm a little unclear on that. >> Okay. I'm going to I'm going to withdraw the question then. So, how about this? The supply demand. Does that is that the canary in the coal mine? Because obviously free cash flow doesn't work with Nvidia because they're the recipient of other people's cash flow. >> Uh well, not so much. There were there were some actual revelations in this report talking about some vendor supplied financing. Uh and it sounds like that is going to continue or even accelerate from here. and they've started to uh disclose that. So maybe cash flow is moving uh to some of these other other guys out there. Um but in terms of the supply and demand question, I think they answered it with demand doubling and supply uh perhaps uh you know just 70% year-over-year here. So there's still a gap to total demand here. >> Wrap it up with this one. Is China an opportunity, a threat, or both? >> It's a very good question. We're still uh waiting to hear about shipping to China meaningfully. Um that would be the opportunity, but for some reason, we wait. My guess is that maybe even on the provincial side in China, they have a soft ban on Nvidia. Um but uh but beyond that there could be a small threat from uh Chinese infrastructure uh grow or buildout uh in China but it is limited limited by pretty much 7 nanometer uh capacity maybe 5 nanometer we're not uh at all close to three or two the way we can see in the west >> and the Nvidia conference call apparently I'm told just wrapping up. So, let's keep rolling with Chris Roland to Susuana joining us now with more. Uh, Chris, market liked it. Stocks up nearly 5%. Market liked it. Market liked that 70% number for sure. There were some additional details more about vendor supplied financing. The bears will probably try to hang on that. Uh, additionally, there were some gross margin revelations. uh gross margins look to be pressured particularly in the fourth quarter around memory and so those numbers uh for next year are probably not going up as much as you would think uh just given that that gross margin mitigation but kind of to our point and we talked about it at the top of the show Chris the supply constraint idea where Jensen Wong just saying on the call and he'll probably talk about it with Jim Kramer and Mad Money coming up in about 10 minutes that if they didn't have that constraint they could grow more. So, if we hear Nvidia at some point say, "Well, our our manufacturing partner TSM can can build us more faster, that stock's got to go up then because what they're saying, I think, is that supply constraint would be over if we get that, and I'm not saying we will." Well, model numbers go up for sure. Uh, and yeah, that that is the case. If if anything, we would bias it to the upside on increased supply. Nvidia shares they're moving higher after the company reported better than expected results in revenue guidance. Joining us right now to break down that report is John Finn. He is a key bank capital markets equity research analyst. Good morning to you. Um obviously remarkable remarkable quarter. The question is which part of what part of Wall Street missed this? I think what was surprising to the upside for for Wall Street I would say is the outlook for next year right um you know Nvidia has consistently solidly beat and raise expectations on the quarter in the guide I don't think those results were were generally pretty much in line but the 70% um revenue growth outlook for fiscal 28 was very impressive uh street was looking for up 45% that was what was uh I They put Nvidia over the top here. >> So, when you start to think out about what this company could really be worth, we're sitting at 222. What do you think it What do you think it really should be worth? >> Yeah. I mean, our price target is $330. It's a a pretty I think a conservative number. It's based on 20 times our numbers. I mean, Nvidia yesterday said that they actually have demand for 100% growth next year, but they're actually supply constraint and as result is uh is only currently able to grow 70%. So, you know, potentially there's uh there's upside to those to those numbers potentially. >> And so, when I mean, we're all trying to figure out, you know, how long does this last? Is this last forever? What are you thinking? You know, I think every new opportunity is ultimately cyclical at some point. Um, I do think that demand is clearly durable in through all of next year and probably into into a good part of 2028 right now, right? Just given the supply constraints that we have right now. and and therefore when you think about the sort of larger question about this asset class idea and when we start to see $500 billion of loans made into this space is that make sense to you? I do um I do I feel that in this particular case it's not your classic you know asset financing situation because I think there is truly an and real demand there right and it's not a situation that if Nvidia wasn't going to provide financing for some of its customers that they would go and buy another solution right there is no other merchant AI chip solution out there on the market that is a credible alternative to Nvidia right now. And you know, I think the probably the most telling thing is they talked about how, you know, they're investing $50 billion into frontier AI companies such as like the open AIs of the world, but they're expecting uh those companies to generate over $ 160 billion in revenues next year. And these are multi- multi-year agreements. So, it's it's pretty clear that there is true demand for their solutions here. and they're just enabling that >> cheering inside the AI world. Nvidia's got the crowd on its feet. Folks, you know what? I grew up in the 1970s, right? And my favorite baseball player uh of all time, Reggie Jackson, who earned a moniker, Mr. October, right, for his World Series performances. In fact, this is 1977. Three separate first pitch, the first pitch, bam, first pitch, bam, first pitch, bam, right? I mean, the guy was not bashful, right? He boasted that, hey, I'm the straw. I am a straw that stirs the drink. And it was true. And that's the case with Nvidia, which is rocking today, knocking the cover off the ball last night. Not only did they post these amazing earnings, but guidance was phenomenal. But here's the thing. In recent quarters, Nvidia shares have actually slumped after impressive results. So, what's different this time? Well, beyond the numbers, I think the conference call, particularly the CFO, Colette Crest, she was phenomenal. In fact, the stock was initially down. She started speaking, she turned that thing around. Also, the company provided guidance. They hadn't really been doing that. That was essential because not only did Jensen and company tell their own story, but they also clarified the impact, the magnitude of the AI revolution. They are the straw that stirs this drink. And boy oh boy, what a straw it is. Let's take a look at these numbers for a second, right? If you hadn't seen it already, uh the two main businesses, Hypers scale cloud industrial enterprise up 102%, data center up 117%, revenue $96 billion. This is three months, a billion dollars a day up 106%, gross margin 75%, operating margin 66%. I mean, it's just absolutely phenomenal. Phenomenal. 12 analysts raised their target on this stock, but this one uh you know, believe me, a call was out to the guy Raymond James. $515. In other words, you know how folks come on the show and say, "Well, it's a $5 trillion stock. It's going to be tough to get it to six." They're saying no. 13 trillion. Uh four maintain their targets. By the way, no downgrades that I can find. I got to bring in IO Fund CEO lead tech analyst Beth Kendik. Beth, I mean, golly, it was everything you said it would be and more. So, let's kind of walk through these numbers. I went through your note and it's interesting because you kind of focused on not the hyperscaler part of the business, but the other part that's generating this revenue. >> That's correct, Charles. A major takeaway last night is that Nvidia proved it may not need hyperscalers as much as the market thinks. Although hyperscalers do represent half of Nvidia's revenue, it's really those non-hyperscaler customers. So AI clouds, neoclouds, enterprises, they grew even faster than the hyperscaler uh portion of their data center segment. And what's mindboggling, Charles, is that even though the CFO says they're expecting 1.3 trillion in capex next year, and if anybody knows the number, it's Nvidia. Um that number doesn't even include the non-hyperscaler segment. So it's 1.3 trillion in capex plus some for Nvidia next year. and and and this chart here. So, uh in this report, 40 billion versus almost 49 billion, but you go down to the first quarter of 28, uh 64.8, 66.2. Just to your point, just absolutely remarkable. And this gets to some of the push back, right? A narrow number of clients, a narrow number of customers. That was one of the bare arguments against it. Another thing you pointed out that I thought was interesting, the tokenization, right? Lifetime token output, AI factories. I want to start first with the token side. We know tokens have gone through the roof. Uh particularly like with the bots, you know, and the humans have very little to do with it anymore. But explain the correlation between the token usage and how it justifies the increase in price. >> Yeah, absolutely. Charles, last night, Nvidia guided for 70% growth next year. Analysts were expecting 45% growth. How can this company do that? Well, it goes back to lowering token cost. They Reuben will be lowering token cost by 35x. Now Goldman Sachs has forecast that token processing will reach 47 quadrillion per month. There is plenty of room for Nvidia to engineer better systems to drive down token costs and justify higher prices. And that is exactly what is driving that higher guide next year. >> This is that Javon's paradox. I guess everyone talked about prices are going this way, usage is going this way, and it all benefits uh uh Nvidia. This is exactly what Nvidia wanted. I got to ask you a little bit about this, the AI factory platform, right? Uh Jensen, they're there seem like they're always about three, four, five years ahead of everyone else. We know it's not just the stacks, but also the CUDA system that you introduced that you taught me about a few years ago that kind of keeps them in the in in the sort of lead position. >> Yeah. And Charles, you know, last night it really was about broadening the AI trade beyond big tech. In one area Nvidia has the market cornered is AI factories. And that's because they're combining compute, networking, storage, and software. Now, it's not only the complexity of combining all of that. It's also securing the supply. And that is something that enterprises will never want to take on on their own. And that's why the non-hyperscaler trade really does matter because companies, neoclouds, enterprises will always look to Nvidia for those AI factories. >> What about Jensen's uh comments about you know seating backing these names up you know the again the push back is this is circular financing. It's gimmicky. Uh but he's saying listen these are these kind of startups. It's hard to find the billions of dollars that are needed but it's essential and it's there's nothing gimmicky about it. >> Yeah. And I would almost look at it company by company. If we look at Nvidia's financials, you stated this already, uh a very impeccable f very impeccable financials. Uh they can really afford to to start to help finance uh this buildout and there's really no threat to Nvidia's financials uh by investing in these up and cominging companies. >> Revenue per gigawatt uh a few years ago I think it was like 30 billion now it's 5060 billion. You can see the 1 gawatt platform. We go from the opera to Vera Rubin. It's 18 to 40 billion. How sustainable is this? This is again, it's hard because we just the the numbers roll off our tongue, but in real life, it's it's mindboggling this kind of pricing power. >> Yeah, it really is. What you described was a 2.2x increase in revenue density from the exact same power envelope. Now, Nvidia's customers will not be able to secure infinite power. Um the goal for Nvidia will be to double the revenue generated increase you know token output uh within those fixed power envelopes within those fixed gigawatts and that's exactly what they're doing. >> I I I got to uh there's one thing that's been bothering me today. Uh memory the things that they said about memory just you know the the the the demand the pricing maybe it's even a reason to give up a little bit on the margins. Memory stocks were up premarket all of a sudden they got hammered. So I'm reading C CXM the Chinese memory name. There was also some news out on them about the the DRAM supplying 50% of China's DRAM. Is there this competition? You know on the memory side of this story which should be it's higher. These stocks are struggling today. Is this something we should be really concerned about as investors? A lot of people watching the show they own Micron. They want to know why it was up 35 bucks last night and then and it's down today. >> Yeah. Memory has been a wild ride in both directions. What I would say is that inference especially is only going to increase memory storage KV cache offloading. It's nearly impossible 99% probability that memory is nowhere close to the cyclical top. Uh and it's only because inference is in its early stages. How could inference be in its early stage and memory top? It makes absolutely no sense to me. >> Right. So, so hang in there folks. >> Yes. Hey, >> Farra has increased his 2027 earnings forecast for Nvidia following their results, saying that Nvidia has a strong hand with performance ecosystem, fragmented fragmenting market and financing power. Pleased to say that Pierre joins us on set. Good to see you. Thanks for stopping by. >> What do you mean? >> What do you do with that number? 70%. Not only do they usually not give that sort of guidance, but giving such a large guidance that itself was supply constrained. This is like beyond beyond what you could have ever imagined, right? And so what do I do with it? I analyze it and it's in a supply constrained environment. So that means this 7% is going to be reached quarter after quarter. So if you break it down, it's 15% growth every quarter from like the kind of 110 billion they guided for for the next quarter. That means at the end of next year they will be on a run rate of making a trillion dollars of annualized revenues. That's a big take. This is actually something Yensen hints towards um back in March at GTC when he talked about the trillion dollar orders uh he got in so far on the Ruben and Blackwell uh systems. But given this the stellar results is there anything that was cautious to you whether it was the merger the margins the competition uh anything bring to you any caution the circular financing that they had to address when it comes to this name? >> Well um so I I think the guide they gave is supply constraint. We follow the whole supply chain. We look very closely at who's deploying what. We we do think demand is significantly above that. So the thing that could keep me nervous would be supply issues and what one of the things we discussed last night with management was you know uh this like mounting food against data centers in the US people like feeling uncomfortable with these giant data centers popping up in their communities. Uh so that's one of my concerns. Uh and then on the supply chain, I would actually say so far if you look at the track record of the supply chain at actually pushing the limit a bit further every quarter, I I do think we have very good chances that at the end of the day, Nvidia beats that 70% guide because remember it's supply constraints and when you look at your supply over the next 12 months, you're usually on the cautious side. So I wouldn't be surprised to see a tiny bit more growth next year. And when Colette Crest was was speaking to you all on the call and she was talking about the financing that they were doing, she said the majority of that is going to fixing this is going to the supply chain. Does that alleviate some of the concerns about circular financing if the goal of them of the financing is to help the supply chain and thus get that 70% look more like 100%. That's a very very good question and it alleviates some concerns but not these concerns because the reality that people who want to invest in this data center they are like standing in line and waiting for it and you have all the hyperscalers they have trillions of dollars they can invest in these data centers but it's actually alleviating the concern of Nvidia who doesn't want to see people deploying compute depending on hyperscalers who are also developing their own ships so Nvidia says come to me invest invest in a data center with our technology and don't you worry about financing. We have you covered. Look at our balance sheet. Very, very smart and a very good way to protect their ecosystem. >> And speaking of the hyperscalers, when you know they're obviously projecting 70% growth next year, does this mean that they're expanding beyond the hyperscalers to other areas? >> Yes. Um but but not that much. Actually, hyperscaler capex are still growing very very fast. We do expect hyperscalers to actually burn free cash flow next year like uh something around $und00 billion because their capex is probably going to approach a trillion dollars. But at the same time this financing uh headed towards what we call the neo cloud. So these like smaller very agile teams who can like pull together power shell and land uh very fast together are actually representing a growing part of the market. they were maybe um uh you know uh they are now like approaching uh u 50 um more than 50% of the market and so the hyperscalers are slowly uh coming down in the mix. >> One of one of the other interesting fast facets of this ecosystem is just the price of using AI is collapsing. I mean, you you get these new models coming to market and we don't know where they've come from and they're performing nearly as well as the LLMs and they're free if not something close to free. Is there a necessary tension in the idea that the product itself that is models and AI is becoming very cheap but the cost of building the ecosystem is still very expensive with the supply constraints. >> Yes, it's a it's a good uh it's a very good question and so the all this is very new but just think about a product you know very well your iPhone. Your iPhone has increased more than 2x in prices over the last 15 years, right? Uh now the cost of one transistor on the chip of your iPhone has come down by a 10,000x over that period. >> But you're having a million more transistors on your iPhone than you had 15 years ago. So the token is a new transistor. Price per token will keep coming down like very very rapidly, even faster than the transistor. But the amount of tokens you're using, there is no limit. And like Elon Musk likes to put it, there is no limit to the demand for intelligence. And as long as intelligence can deliver value, like growth in the number of token will always exceed the pace at which the customer hangs open source modeling so much because it just means more people can adopt it. >> More people can adopt it and open source means you're a smaller organization. You can't develop your own chip and he likes that. Let's begin though with Nvidia reporting a blockbuster quarter very strong guidance. Jensen Wong telling CNBC and Jim last night there's still runway ahead for demand. >> Demand is super strong and incredibly it's accelerating. You know obviously we're already a very large company but to be able to grow continuously and now to accelerate our growth is pretty extraordinary. Now what's happening underneath the the things that are going on number one is that AI is now useful. It's doing productive work and the tokens that are being generated by these AI labs are now profitable. Our next guest just raised his target to 400 from 315. It's not quite a street high, but it's pretty close. He says this quarter should remind Nvidia investors why they own the stock. Joining us today, Bernstein, senior analyst Stacy Rasgun's with us. Stacy, good to have you. Thanks for the time. >> Yep, good to be here. >> So, what what part of last night did you find most compelling? I I mean clearly it was the the raise to to next year. I mean we we a pretty strong beat raise in the near term. People expected that but I mean they're guiding 70% revenue growth for next year. For some context I think at least the sellside estimates were up 44% off of a lower base. So just a massive uh raise relative to prior expectations. Um they also got in front of some of the other worries. People have been worried that gross margins may take a bit of a hit because of memory prices and they got in front of that. they're guiding them, you know, from down to the low70s versus the mid70s. I I think it's it's it's fine. Um, you start to look at the earnings power of this company. I I I mean, numbers are clearly going up, sellside numbers went up, buy side numbers, I think importantly, went up. That maybe that's something that hasn't happened in a few quarters, but that's clearly happening today, right? And I mean, maybe just uh take what what Jensen said, the the idea that a company that is this large could continue to to not only grow, but actually accelerate off of an already strong base. I mean, it's just something that we haven't really seen before. And it really does, I think, >> get to the the point that there the demand that we're seeing here really is real. I think these things actually are being used. The question of returns, I think, is is increasingly getting answered in in the form that there is a return on this investment. I I was I was just really happy to finally see see it start to really come through in in in the numbers and so I was very pleased with it yesterday. >> Is there something that explains its recent underperformance on earnings? I mean was there something different this time? >> Yeah. Well, there was like I I think importantly the the buy side is always as you know above the the the sell side. the actual investors investing in the stock, their expectations tend to be higher and maybe you could argue for the last few quarters, they've been very strong prints, but the buy side numbers like especially into next year and beyond didn't really go up. I I think they went up and probably reasonably materially uh this time that that that is important. That is one difference. And like I said, just there's been this big question as as their their next generation platform Reuben starts to ramp, what is that ramp going to look like? Are there delays? Are there not there clearly no delays? You know, Reuben's ramping really really strongly and now we're starting to see the implications of that that ramp on the numbers and like the growth is clearly like showing showing through here. So that is we got some concrete evidence now real concrete evidence that that growth is happening. >> Yeah. I mean Stacy you mentioned the the kind of the buy side's always higher. I think if you extrapolated what the hyperscalers told us about likely spend next year, uh, you got to these something similar to what Nvidia's current guidance is looking like. Um, one change and I'm sure you're spending a lot of your time trying to contend with this with clients is the complexity of the story has definitely increased. Uh, you mentioned the balance sheet for Nvidia is a massive competitive advantage, but it means it gets used a lot, right? They're doing all these component supply agreements and locking in orders there. They're obviously financing a huge percentage and making acquisitions of this ecosystem. So, is that something that's going to hold back the valuation? Because you got a $400 price target. That's $10 trillion market cap. >> Yeah. Yeah, it is. I mean, like, we we'll see. I mean, I think using the balance sheet, it is a moat. And and my my take is it's as much of a moat as as their as their technology and and and their software and their ecosystem. Nobody else can really do the things that they're doing. I mean, they've got I think just their direct supplier agreements are close to $300 billion. And this is for things like direct to memory and wafers and that sort of thing. And so they can lock up that supply much more than any of their competitors can can. And and you need that supply to be able to sell the the product. And so that's important. And in terms of the investments in the ecosystem, you know, people people worry about they call it circularity. And I'm a little more sanguine about it. Um, my view has been they're generating so much cash that I mean almost they they they don't know what to do with it and you know they're already returning a bunch and they're they're buying supply and they can't really do big M&A and what what better use of that of that cash versus to to invest in and grow the ecosystem around their products and and and I mean you have to remember they're not really writing checks for most of this of this stuff. It's it's more like they're you know they're they're lending out their credit rating in some sense. they're backstopping stuff. Um, I think the the risks around those have been pretty clearly thought out. Um, and and if they've got customers that have strong demand, they don't have >> the credit ratings and the wherewithal like to to >> have enough of a of a history that that the folks that need to put the the supply and everything in place for them are comfortable >> without that. I think it's fine. I think it's fine. >> Yeah. Better to use Nvidia's balance sheet than Anthropics if you >> Yeah. And like they're not writing checks for this stuff, per se. I get it. Um Stacy, just for me, I mean, you mentioned capital return or you mentioned all the cash flow and >> how do you see it in terms of dividends and buybacks? Will it only go up from here? Are they going to actually allocate even more? >> Well, I mean they they could and they said more than 50% of of free cash flow available free cash flow. By the way, all the supply commitments and everything, the cash that goes out for that, that's not available free cash flow, which which is fine. >> Um but I mean the cash flow is going to go up. So I I mean just mathematically I think the cash return has to go up even if they don't increase the percentage. And just for some context I think in our current model now next year I mean we've got to buy back $120 billion I think something like that. Um because if I don't like I'm just and I've already still got even cash piling up on the balance sheet. If I don't model something like that I've got it piling up even more. And so we'll see what they do. Clearly the capacity is there. They'll they'll make the capital allocation decision on what they they want to do with it. But um yeah, I think they'll probably be returning a lot of a a lot of cash whether or not that percentage goes up or not. Not >> very much. Nvidia delivered a strong sales outlook. That is putting it mildly. But it did warn that margins would narrow in the coming months, principally due to rising memory costs. Let's talk about the impact of that with Cody Akri, managing director and senior semiconductor analyst at Benchmark, who has a buy rating and a $335 price target for Nvidia. And what is so interesting, Bloomberian King made the point at the top of the show in the semiconductor space. If any CFO or CEO said this is what's going to happen to margins over the next 6 months, the stock would not go up like it did. You seem sanguin about that as well. >> Yeah, I I really was. And and initially the stock was down on that disclosure. So uh yeah like you said had any other company talked about a collapse of margin to 75% to 71 to 72 in two quarters um and then recovering only about another 100 basis points even after a price increase uh that would have been enough to uh tank the stock but uh but as Carmen mentioned that guidance for revenue really trumps everything when they're talking about 70 to 100% increase and 70% in the bag for next year. Uh that's a $300 billion annual increase and that's $120 billion ahead of expectations. And so our numbers are going up above uh nearly 700 billion for next year from 400 billion in fiscal 27 calendar 26. Uh that's taking our EPS estimates, you know, up uh nearly $3 for next year. Cody, what links the margin story with the revenue growth outlook story is memory, right? You know, they were pretty clear that what they would have been able to do on growth were it not for supply constraints, this business would be doubling. At the same time, the emphasis on circular financing is Nvidia saying we're just trying to help everyone get moving. particularly Klet Crest the CFO telling me they are helping people get supply. How did you assess all of that explanation on Nvidia as a the bank of Nvidia in the ecosystem? >> Well, I think it's Nvidia just trying to ease any bottleneck. Um as you said that uh the memory is the biggest constraint. They have agreements now stretching out three years. uh they've got committed nearly $300 billion dollars in uh capital commitments uh for to ensure pricing and availability. Uh so they said that they're they're well set for their expectations for at least the next two to three years and then they're going to be working to ensure guidance capacity upside uh from that point. Um, regarding your u your other comments about circular financing and um I think one of the other big bottlenecks to the industry is just the availability of things like land power and shell and data center uh infrastructure uh and on project financing that you know that's as as critical of a capacity constraint as memory is in many cases when you have small startup projects that are just hamstrung by financing access. So if Nvidia can uh loosen that bottleneck by providing their balance sheet, it's all the better for them because it all comes back to them uh exponentially in revenue. >> Cody, on the analyst call, your your industry peers asked about custom silicon and AS6 and Jensen Wong continues to be dismissive of the threat of other options for accelerators. Do you factor that in or model that in for for growth going forward? >> Yeah, we do. I think competition is a real thing that's increasing in the space. I think you've got guys like AMD that now have uh competitive stacks. You have Cerebrus uh recently went public with its alternative. Uh you've got uh all the hyperscalers internal designs that are competitive. Um and uh even internal uh Nvidia silicon with its Grock acquisition uh is creating an alternative. So, but at the same time, even in the face of all this competition, Nvidia is seeing a doubling of their indication of their revenue growth. And so, even if you're seeing their market share go from say 85% to 75% or 70% uh demand is so strong across the AI complex uh that it's continuing to push Nvidia well above expectations. So, you know, their their issue right now is is simply supply. It's not a a matter of demand. And that's even in the face of of increasing competition. >> Thanks for having me. >> Is it peculiar to you as well based on what happened? >> You know, one of the things I just haven't figured out yet, I've been like up two minds all day on is how much do I want to believe a company in the semiconductor industry when they have visibility on 2028. You know, I thought what I learned somewhere in the last 30 years was they don't have a ton of visibility six, nine months out. And >> that's why they've never gone this far out. They've never done that. They said that right 70% revenue growth. Street was at 44. >> So it worked >> for that name >> for that name. And I agree and you would think it would have maybe made micron go up just because they totally memory constrained the current conditions a little bit. So you'd think on the margin maybe I take my my micron view up and it that's not in the price today, right? So I agree it's literally congruous. Um >> and I I just you know sure they have contracts that are five five years. Sure, they've now put in some penalties for cancellation, but they're kind of dimminimous relative to the overall. In other words, I've just I thought I learned somewhere to mistrust two-year out demand indicators. And so, >> especially in a space that is, as you know, better than almost everybody is so cyclally driven. >> Yeah, this is a cyclical industry. We we're confused about the periodicity and amplitude for sure. Current conditions are great. We know they're going to roll over pretty hard eventually. So, it's like a giant game of chicken that we got to time. You know, I I was just putting um the the initial part on my weekend not always right. And I was putting that photograph from from Kevin Bacon at Foot Lewis where he's going with the tractor toward the other tractor and his shoelace gets caught. You know, I'm not 100% sure when I got to veer off here. Um and I I could see some people saying, "Look, I'm a little worried that it's running hot like Micron's going to do 86% gross margin in a in a in a cyclical business, and this kind of tells you how hot it So, look, I think near-term conditions are so strong that these companies can grow through it. As you know, we said we liked Nvidia, we still do. I like Micron, too. You said you thought Micron was going to double. And by the way, you you just said Micron as a cyclical business. I mean, the the CEO, now I I know, you know, you're going to say, well, what does he say talk in his book, but >> he made the point just last week with Kramer that >> maybe it's different this time. I mean, you used to be a semi analyst. >> I I think it already is different. And I feel like we were raised somewhere to like duck lightning bolts to say it's different this time as if you're an idiot if you say that. But like to those people I'd say look it's already different. You already missed it. It's already over a trillion market cap. Like what do you mean it's the same? I think the question is how fast does it erode? Do they really lose money in 2029 or or beyond? And I think one thing that Micro's not getting credit for is the balance sheet. So sure I could look at a single business say I pay five times peak earnings 11 times normalized or roughly where it trades now. But what if they run with 30% of the market cap in cash as opposed to net debt? Like, shouldn't I care a little bit about the massive amount of money they're making in the next six, seven quarters? I think you should and I think they should get credit for it. The critics would say, well, but they're signaling they're going to buy back the stock and I think the stock's overvalued. So, that's where they're getting I I don't think full credit for how awesome current conditions are. >> So, you so you used to be a semiconductor analyst at Bernstein, right? You preceded Stacy Rascan, right? >> Yeah. So if you were sitting in that seat today as yourself, obviously not telling you what you not asking you what you think he should do, but would you take a look at the Nvidia report and what would you do to shares? Would you and the other names in the space? Would you be tempted to upgrade or or ra I mean up? They're already probably buys, but raise price targets on almost everything. >> I like semi still. I don't think we've reached highs for the major companies here. I think Nvidia will be way higher at the end of the cycle. I still think we're 3 years, four months into a 8year cycle that the market will probably discount a year or two in advance. So, I think we're headed higher over any meaningful period of time, but you just have these periods where um you have to, you know, digest news. There's there's 567, I think, levered or inverted ETFs in the in the market right now. A lot of them are triple long Nvidia, double long, you know, so you're just going to get a lot more volatility around these prints. But ultimately, I think we're still headed higher just based on the hyperscalers's ability to borrow more money to fund the growth for a sustained period. >> Would you be how would you be assessing the data center backlash as you're looking at estimates for semiconductor companies? And if you believe that it's going to be a bigger issue even than it is now, >> would you be tempted, at least in the near term, would you be tempted to take some of your estimates down because you think this is that durable and existential potentially for let's just say for the next 6 months? I don't know. >> Yeah. I mean, I I guess I shouldn't be surprised, but I am a little that it's 23 states that are bringing up issues with data center construction. I always thought it would be a little note specific. I guess when I look at companies with exposure, I still see a pretty big gap. I'm not saying CAT should trade at par to Micron. One seems to be at 101 times normalized and one at 30. >> The charts sure looked similar for a while, didn't they? >> Yeah. But they should to me be closer together. You can't argue that you're going to construct these things forever and pay a high multiple for one business and then they're massively overning for the other. The truth's in between. So, one of the things we do is we tag every stock in the market. Do you have meaningful AI revenue? What bucket are you in? Are you memory and semicap? Are you vertical on edge? Are you platform? Are you, you know, data center? And I think you want to be overweight AI revenue still, but I think you have to be very careful about what pocket you're in. And I would probably sell a little bit of the longerdated businesses that require five more years of spending to make the math work. >> Okay, so back now that Nvidia earnings out of the way, what does it mean for stocks in the weeks ahead? Let's welcome in Tom Lee. He is Funst Strat's managing partner, head of research, also a CNBC contributor. It's good to have you back. >> Great to see you. said at the very top of the show, it's kind of peculiar the market reaction to this today. Nvidia is having a great day, but it's kind of mixed elsewhere. What do you make of that? >> Um I I mean, I think it's a healthy market, Scott, because Nvidia had good numbers, so you want um Nvidia to go up on good news, which it did. It's having >> which it rarely does. >> Yeah. And it's rare. So, it's breaking a pattern of people thinking people don't care about the earnings. It really did matter. And I think that we are seeing a positive response in software which of course is on good numbers and there and those names are downstream of the AI trade. So I I think it's actually an overall healthy reaction. >> I know but the the software moves are so specifically related really to what we got from Salesforce and Crowd Strike and Opta Octa and others. I find it interesting that Meta's down, Amazon's down, Alphabet's down, AMD's down, Micron's down, Marll's down, Corweave's down. I wouldn't have expected that after Nvidia delivered what they did. >> Yeah. I mean, it's also possible people were using those names and not having exposure to Nvidia. So, they've got to find a source of funding if they have been underweight Nvidia. And again, I've heard it from many guests on CNBC. The thing that stands out is Nvidia's multiple is still very low. So, they've got these huge revisions. The stock hasn't kept up. Now, the PE keeps contracting. >> Yeah. >> What about the data center debate? Speaking of the midterms, that only going to grow louder as you approach election day. Now, we're still a few months away from that. >> Yeah, >> but that feels like it's at play here, too. And why the market and those specific names just haven't traded all that well lately. >> That's right. It's becoming a actually a an issue that resonates with voters and it looks like it's turned already. some elections like in Ohio and then we're seeing governors in Republican states and pro data center states, you know, supporting a pause. So, you're absolutely right, it's become a political issue. I don't know if this is also maybe fueled by China, which wants the US to slow down its AI efforts. But you're right, it's it's becoming an issue, and that's probably why the downstream trades are doing better, the AI downstream trades. Tech Nvidia adding $442 billion in market value just yesterday, marking the second largest one-day gain by any stock in history. Gene Monstra of Dean Water Asset Management joins us now for more. Gan, welcome to the program. For years, we used to talk about Apple and Apple getting bigger and bigger and people used to talk about deceleration and it just felt like in the last few months we were doing the same thing with Nvidia. What was your reaction to that outlook from that company? Well, I appreciate the Apple analogy, John. Actually, it's something that I've been thinking about more recently, that growth that Apple had. And just to put into perspective what's happened with Nvidia over the past few years and looking for towards next year, calendar 22, Nvidia did 27 billion in revenue. Calendar 27, so 5 years later, they'll likely do more than 700 billion. It's probably going to be 750 in revenue. So, 27 to 750. The reason why I say that and in the comp relative to Apple is that what's happened with Nvidia has been breathtaking even relative to the iconic tech moves that we've seen. And so the key takeaway here is less about what we've seen from 22 to 26. It's more about what we're going to see from 27 to 30. to get to your your point here. It's been well documented here about the the numbers, the guidance, the plus 70% revenue growth rate versus the street at plus 45%. That's for calendar 27. That was kind of the eye openener from from a couple nights ago. I expect that next year calendar 27 will probably grow at 90%. Uh that means that the growth rate in calendar 27 will be about the same as it is in calendar 26, 90%. And I think uh at the core of what's going on here, if we just look at the business, forget about the big picture with AI, but just if we look at Nvidia's business, at the core of what's going on is that the customers simply just can't get enough capacity to do inference. And that is what is driving these numbers up. And ultimately, I still believe we're probably in the third inning of this buildout. Sounds hard to kind of wrap my head around that. I still think we're very early. Gene, I really struggle with that, but that's the way things are heading. Gene, when you look at this company, one unique part of the way they operate is they look to foster and create their own demand by helping to build out the AI ecosystem elsewhere. What would you point to as a unique feature of that? Well, I think from uh you know the demand side, it's just the speed of their chips that ultimately is what is driving all this and that's what's allowing them to have this incredible pricing uh leverage kind of next year probably 20 30% potential pricing increase on some of their products and I think that's the piece John that gets missed in this conversation is that ultimately uh consumers or their customers really need these chips more than uh any other custom silicon. And so I think that's a big key takeaway here is that uh they basically have the best stuff in town. >> What then do you make of some of the other moves they've been making recently? Gene maybe lost in the news flow of that huge gain in earnings they had yesterday was the fact that they bought hugging face a big platform for open source modeling and discussion. They have their own open source that they're working on too. Gene, what exactly is Nvidia doing there? So this is a important dynamic in terms of how Nvidia sees the progression of models. And so what hugging face is is for those who are more technical, it's effectively the github of AI development. For those less technical, it's a library of uh open-source AI models that people who are developing AI can basically pull thousands, hundreds of thousands of models and put them plug and play them into uh the development. And so that's what this is the big picture here, Danny, is this is the theme around open-source. And this is something that Jensen's been very supportive of. But there's a story underneath the surface that I think is more important to what the headlines are, which is hugging faces uh progressing Nvidia into the open source world. What's most important here is that uh Nvidia is doing uh is basically building out is doing the inverse of what their customers are doing to them. So just stick with me for a second here. If you look at customers like Meta and Google um they are building their own custom silicon effectively they want to compete or they want to have alternatives to Nvidia. What Nvidia is doing here with hugging face what they did last week with poolside a small acquisition uh is essentially they're building um the the own models and the event that their customers their current key customers start to do more their custom silicon they have an advantage to focus more on the models themselves and make money from the models themselves. It's just a fascinating dynamic. As tightly as these companies, the mega caps and Nvidia hold their hands, Nvidia's also uh getting some diversification in case those customers start to do their own custom silicon. >> Well, there was also in the earnings out some some other hedging just looking to other customers besides the hyperscalers looking to sovereign AI as well as to enterprise. Gan, does that seem like a growing at least the pace of growth fast enough versus their historical customers to kind of alleviate some of the concerns over concentration risk? >> So the customer concentration actually the top two declined in terms of total percentage of revenue went from 38% in the April quarter to around 30%. And the reason is SpaceX basically came out of nowhere. It was a a couple percentage of total revenue in the April quarter. It's probably about 5% in the in the July quarter. So they are getting some diversification within that. But to your point is the script is flipping in terms of where they're getting their growth from. If we're looking at for next year, those hyperscalers are expected to grow revenue just over 50%. If you look at the non-hyperscalers, the sovereign like you mentioned, they're expected to grow around 85%. So um why that's important is that what investors struggle with here when we started and talked about this breathtaking increase in in in numbers it's less about the law of large numbers there Google's a similar size business the issue is this the slope of the deceleration of revenue and as the nonhyperscalers grow that gets investors more comfortable that that decline from 90% next year to maybe 50% in counter 28 uh won't be as sharp and so I think that this customer divers diversification. This script flipping in terms of focus more on non-hyperscalers is an important piece that allows investors to sleep just a little bit better at night knowing that that growth curve isn't going to be as sharply declining as maybe some think today. All right, I hope you're all doing well today and staying calm in this market. Friday was a mixed day in a market with some notable red action in AI hardware, stocks related to data center buildout and also small caps. We did get some news stories that I'm going to address in a moment that likely weighed on AI hardware, but the main event on Friday was the speech from Fed chair Kevin Worsh. I'm not going to recap everything Wars said, but his speech is the main reason for the declines we saw in stocks Friday morning. Worsh emphasized that the Fed is committed to bringing inflation under control, saying that the Fed quote must be sure underlying inflation is clearly and quickly approaching our target. Otherwise, we got stuff to do. Worsh's comments caused traders to increase their bets on future Fed rate hikes, yields moved higher, and many small cap and momentum names traded lower. Worsh also spoke at length during his speech about AI, token economics, the Frontier AI Labs revenue run rates growing more than 500% year-over-year, and more. I'm not going to recap everything War said about AI, but I would essentially summarize it as him saying that the Fed is watching this stuff closely and that there are still questions regarding where everything will land and the full impact AI will have on the labor market and the economy. Those comments and the implied uncertainty regarding AI's future impact on the economy likely put some additional pressure on AI hardware and data center adjacent stocks Friday morning. Now, let's cover some Nvidia news and I'll cover memory news after that. The Wall Street Journal reported that Nvidia has paused parts of its new AI cloud revenue sharing program that was launched back in July. But I noticed some industry professionals online saying they spoke with Nvidia and Nvidia denied the report. CNBC's Christina Parts and Eveos also said that Nvidia denied the pause by saying, quote, "The new business model we introduced in July that opens up compute access to the fast growing AI ecosystem is still in place and continues to evolve due to high demand." As a reminder, these deals are meant for earlystage neoclouds that need help getting things up and running because they lack the capital needed to do so. In those situations, instead of Nvidia simply investing in the Neocloud, Nvidia agrees to share in the cloud revenues as well. When Nvidia introduced the new business model in July, they named Sharon AI and Fermus Technologies as the first companies that will be part of the initiative. Look, I understand the circular financing concerns. The reality is that this will be a very small portion of Nvidia's future revenue and they are helping some early stage companies get things off the ground since those companies lack the capital and investment grade ratings necessary for the initial stages of their buildouts. When the hyperscalers were in the early stages of their buildouts, they already had wellestablished businesses they could use to fund the initial stages of their cloud buildouts. Today, these smaller companies do not have that, but they do see the opportunity that's ahead. Nvidia is helping them work through the initial stages of their buildouts so they can get started. I don't see a problem with that. Again, we're talking about a very small portion of Nvidia's future revenue. On Friday, the information published a story claiming that the Commerce Department is working on a slimmed down replacement for the Biden era AI diffusion rule. According to the report, a major objective is to close the remote access loophole that allows Chinese AI firms to access Nvidia GPUs remotely when those GPUs are located in clouds outside of China. I need to provide a disclaimer and say that this has repeatedly been an unreliable source regarding Nvidia China rumors in the past, and I have no idea if this story is true or not. I'm just bringing it to your attention. so that you're aware of it. Now, my honest thoughts are that the US should be very careful on this topic because preventing developers in China from accessing Nvidia GPUs abroad could have unintended consequences. We know that Nvidia GPUs are not allowed to be sold in China in large quantities at the moment. We also know that there are export restrictions on advanced lithography systems as well as on certain components, but now we're specifically talking about whether AI developers in China can rent GPUs that are located in clouds outside of China. Keep in mind that about half of the world's AI developers currently live in China. The platforms that developers choose to build on are the platforms that will win. We saw with Microsoft, we saw it with Apple, and now we're seeing it again with Nvidia. Now, if you cut off half of the world's AI developers from building on Nvidia's platform, those developers will be forced to build on a different platform. If that happens, the US could unintentionally speed up the growth of a separate ecosystem in China built on technology from Huawei, Cambercon, and others. If you speed up the development of that ecosystem, then you also speed up the eventual export of that ecosystem beyond China into various markets around the globe. That would of course be negative for Nvidia, but would also be negative long-term for the US from strategic perspective. Put simply, it is in the United States strategic best interest that developers in China continue building on the American technology stack, even though those GPUs are located in clouds outside of China. If you cut off their access to Nvidia GPUs, while Chinese regulators simultaneously limit the number of NVIDIA GPUs that can be shipped in a China, then those developers will be forced to build on a different platform in a separate ecosystem. And again, we're talking about half the world's AI developers, which is nothing to sneeze at. that separate ecosystem and the Chinese technology stack could potentially compete with the American technology stack at some point in future years and take market share in various countries around the globe. That would be bad for the US from a long-term strategic perspective. Also, a quick heads up, President Trump and President Xi of China are expected to meet on September 24th and the president has said that AI will be one of the topics of discussion during that meeting. That meeting has implications for Nvidia's short-term price action. So, keep that in mind. Now, let's cover some memory news. In recent videos, I've mentioned Nvidia NVHBM, which is essentially custom HBM for XPUs. This is an expansion of Nvidia's NVLink Fusion, which allows custom accelerators to be used in Nvidia systems. And now it's being reported that Samsung has secured an early position as a key supply partner for NVHBM, and that Samsung is developing an 8 layer version of HBM4E, which is shorter than the 12 layer and 16 layer version Samsung had originally prepared. It's also reported that Nvidia set a speed of 17 to 18 Gbits per second per pin for Samsung, which is about 20% higher than the 14.4 Gbits per second per pin of Samsung's initial HBM4 samples. With all of the talk about custom accelerators from Hyperscalers, OpenAI, Anthropic, and so on, we need to remember that Nvidia innovates across the entire stack. We also need to remember that with Envy Link Fusion, companies can integrate their custom accelerators with Nvidia systems and remain customers within the Nvidia ecosystem. Additionally, the world is already compute constrained, which means there's already enough room for multiple chip makers to succeed, and the total addressable market is growing an extraordinarily strong clip. On top of that, now is not the time for Nvidia investors to worry about market share. In other news, China CXMT posted their first earnings release after going public, showing first half revenue up more than 870% from a year ago and a surge in net profit. CXMT sees the global shortage of DRAM persisting in the second half of 2026. CXMT also said in a filing that it has shipped samples of its LPDDR6 to customers. That may have spooked some market participants who are concerned about CXMT's innovation progress and worry that CXMT may eventually flood the market with cheap memory that challenges the big 3's pricing power. It's important to remember that CXMT can't fully satisfy all of the demand in China, let alone the rest of the globe, as there is simply not enough supply. Not that long ago, Reuters reported that CXMT was charging some customers more than Samsung and SKH. They would not be charging higher prices if there was a surplus of supply. It's also being reported that Bank of America sees the memory shortage getting even tighter. They expect DRAM and NANS spot prices to rise another 10 to 20% in September. And they see a scenario in which DRAMM industry revenue growth is greater than 80% in 2027 if current pricing momentum persists. The report says Samsung indicated 2027 supply fulfillment remains only around 50 to 60% while SKH indicated it has little interest in expanding commodity D RAM/nam production because HBM is consuming capacity. Also a quick heads up we get South Korean export data for the month of August on September 1st. That is directly relevant to memory stocks as Samsung and SKH are both based in South Korea. That export data should give us some insight into memory pricing during the month of August. Now, in case you've missed recent videos, I'm once again going to recap Nvidia earnings. Keep in mind that when I post a video on YouTube, the vast majority of my subscribers do not see it. And so, I'm going to recap Nvidia earnings again in case anyone's missed recent videos. Nvidia reported revenue of $96.2 billion versus $92.3 billion expected. Data center revenue was $89 billion versus $86.3 billion expected. Adjusted EPS was $222 versus $29 expected. And Q2 gross margin was in line with expectations at 75%. Something that I think initially spooked market participants when the report came out was that Nvidia's free cash flow decreased notably during the quarter to $21.3 billion which is down from $48.5 billion last quarter. This appears to be due to a decrease in cash flow from operating activities which Nvidia CFO addressed in her commentary. Cash flow from operating activities was $24.1 billion versus $50.3 billion a quarter ago and a sequential decrease was driven by higher working capital adjustments and cash taxes. It's worth mentioning that Nvidia previously indicated that cash taxes would rise materially in Q2. Also, Nvidia had a significant increase in accounts receivable during the quarter, resulting in a roughly $22.35 billion negative adjustment to operating cash flow. That was by far the largest working capital drain on free cash flow during the quarter. In other words, the increase in receivables reflects revenue that had been recognized, but where the corresponding cash had not yet been collected by the end of the quarter, creating a significant temporary drag on operating cash flow. That has to do with timing. It's not anything to be concerned about. And as for next quarter, Nvidia guided revenue at $18 billion versus $ 104.2 billion expected. And Q3 gross margin is expected to be 74% versus 75% expected. We later learned on the earnings call that the slight miss on next quarter gross margin is due to higher memory prices. That slight miss is likely why the stock initially traded lower when the earnings report was released. Also, in Nvidia CFO commentary, we got this table showing Nvidia's future commitments. This is very helpful and I'm very glad that Nvidia provided this table given all the talk about circular financing that we've heard in recent weeks. I've probably heard the phrase circular financing hundreds of times over the past month. As you can see from this table, the vast majority of Nvidia's commitments are for supply and capacity so they can produce more product and grow revenues. Nvidia's investments and cloud service agreements are relatively small compared to Nvidia's commitments with suppliers. In other words, the claim that Nvidia is quote unquote funding its own growth is in denial of the actual numbers. To put it another way, Nvidia supplier commitments are substantially greater than their investments and cloud contracts. Meaning the overwhelming majority of Nvidia's demand is not being funded by their own investments. Not even close. The circular financing fears are largely overblown and the talking points are getting stale. Now, let's cover the Nvidia earnings call. Let me start by saying that this was one of the better earnings calls from Nvidia in some time. Analysts asked some great questions and both Jensen and Colette were very direct and to the point with their answers. This was a very good call in my opinion and now to rapidfire important points from the earnings call. Nvidia CFO started the earnings call by saying quote, "We expect to grow revenue by approximately 70% in fiscal 2028. That is much better than analyst consensus of roughly 44% revenue growth in fiscal 2028." And that is a supply constrained outlook. In other words, growth would be even greater if Nvidia wasn't supply constrainted. Later in the call, Jensen said that Nvidia's demand is far greater than 70%, but 70% is what Nvidia has high confidence that they can deliver given the supply constraints, but they will continue to work on that. Later in the call, Jensen said, quote, "We have more supply than 70%. Our demand is much higher than that." So, in other words, revenue growth should exceed 70% in fiscal 2028. But of course, Nvidia is conservative in the guidance that they provide. And so they're just saying 70% even though they expect growth to exceed 70%. I can't stress this enough. Going into this report, consensus was roughly 44% revenue growth in fiscal 28. And Nvidia just told us they expect 70% revenue growth in fiscal 2028. And Jensen's comments on the call indicate that growth will actually be greater than 70%. That piece of news is what caused the stock to start trading higher during the earnings call. Nvidia also announced an expansion of its partnership with AWS. AWS is deploying an additional 2 million GPUs starting this quarter through the second quarter of fiscal 2029. Nvidia's non-hyperscaler data center revenue increased 138% year-over-year to 40.3 billion and Nvidia CFO said that non-hyperscaler customers will represent roughly half of Nvidia's data center business. Later on, Jensen reiterated that Nvidia's non-hypers scale customer segment will likely be larger than Nvidia's hypers scale customer segment. That's positive on the topic of customer concentration as Nvidia is working to reduce its dependency on hyperscalers. That said, Nvidia is still growing tremendously among the hyperscalers which have about $2 trillion worth of backlogs. According to Nvidia, Nvidia still sees about $20 billion in server CPU revenue this year and expects CPU revenue to more than double in fiscal 2028. Nvidia expects to ship Rock 3 LPX in volume later this quarter. And on the topic of the Frontier Labs, leadership said Nvidia has invested nearly $50 billion in Frontier Labs. And with Nvidia's recently announced $500 billion partnership with financeers, the Frontier Labs will be able to build and assess AI infrastructure funded by long-term institutional capital at relatively attractive rates. Demand is not the problem. The Frontier Labs have incredible demand and they need more compute to serve that demand. NVIDIA CFO said the Frontier Labs customer traction and usage are skyrocketing and Nvidia believes the Frontier Labs will become the largest technology companies in history. Yes, the largest technology companies in history. Nvidia CFO reminded us that Nvidia plans to return 50% or more of free cash flow to shareholders and she said that Nvidia has returned 60% of free cash flow to shareholders year to date. Regarding gross margins and rising memory prices, Nvidia CFO said, quote, "We are experiencing extreme pricing conditions in memory. The magnitude of the price increase has exceeded our prior expectations and are headed even higher into next year. As a result, we are resetting expectations today for Q3. We expect GAP and non-GAAP gross margins to be 74%. We expect margins to bottom in Q4 in the 71 to 72% range before settling at 72 to 73% in fiscal year 28. As executed, price increases take effect in Q1. So that update on gross margins moving lower is not great for Nvidia, but it does bode well for the memory makers. Nvidia is directly attributing the expected decline in gross margins to higher memory prices. It's also worth noting that Colette essentially confirmed that price increases will take effect in Q1, which is something that was recently reported by Bloomberg. Bloomberg reported server makers were raising prices for servers containing Nvidia GPUs by more than 15% due mainly to higher memory prices. Colette didn't give us a specific amount for the price increases in Q1, but she essentially confirmed that price increases are coming due to higher memory prices. Jensen was asked about OpenAI's new Jalapeno chip and Jensen said that Nvidia is doing something very different. He said that custom XPUs are being developed that are inference specific chips for one cloud or one service. Whereas Nvidia is building an entire AI factory platform that can be used in any cloud and spans the entire AI life cycle. Nvidia CFO emphasized that a large part of Nvidia's commitments are supply commitments that are necessary to produce product. You can see in this table from Nvidia's CFO commentary that the vast majority of Nvidia's commitments are for supply and capacity, not for investments in other companies or cloud agreements. Those commitments are relatively small compared to Nvidia's commitments to secure supply so that they can produce product and grow revenue. In other words, the talking point that Nvidia is funding its own growth completely misses the point. Nvidia's investments and cloud service agreements are much less than their supply and capacity commitments. The talking point that Nvidia is funding its own growth does not add up. The vast vast majority of Nvidia's demand is not being funded by Nvidia's investments or cloud contracts. Those that repeatedly use the talking point that Nvidia is funding its own growth are in denial of the actual numbers. And on the topic of Nvidia's exposure related to its guarantees, they've essentially provided a $ 105 billion credit back stop to the data center campus in Ohio in partnership with SB Energy. And their land power and shell guarantees for AI clouds are only $3.5 billion. That's a total of $ 108.5 billion. As for the $ 105 billion guarantee, Nvidia's guarantee obligations are capped at a total of $ 105 billion and become effective in phases as certain conditions are met. Nvidia's guarantee exposure declines as Open AI fulfills lease payments. The circular financing fears are largely overblown. When asked about things like AGI and recursive self-improvement, Jensen said that demand is going to inflect further. It's worth noting that Nvidia's growth is already accelerating, and Jensen expects demand to inflect even further. Overall, this was a solid earnings report with a very positive earnings call. One of the better earnings calls from Nvidia in some time in my opinion. The biggest piece of news as it relates to the stock is that Nvidia expects revenue growth of 70% in fiscal 2028, which is far greater than consensus expectations of 44% prior to this earnings report. And again, Jensen's comments on the call seem to indicate that Nvidia will likely grow revenue more than 70% in fiscal 2028, but Nvidia is conservative in the guidance they provide, and so they just guide it at 70%. Nvidia usually doesn't guide beyond one quarter. So that is also a notable change. Nvidia's expectation that gross margin will decline due to higher memory pricing is not great, but in the eyes of market participants, that appears to be more than offset by Nvidia's much better than expected fiscal 2028 revenue guide. So overall, these were solid results and a very positive earnings call. Looking ahead, Jensen is scheduled to speak at the Goldman Sachs Communicopia and Technology Conference on September 10th. And then Jensen is scheduled to speak again at GTC Berlin on October 21st. Now, in case you're new to the channel, I want to make sure that you have at least a basic understanding of the underlying long-term thesis. So, let's cover that. Now, I don't know what's going to happen in the short term, but from a long-term perspective, I am very confident that Nvidia will be worth much more in future years than it is today. When Jensen was on the Lex Freedman podcast not that long ago, he was very seriously raising the possibility of Nvidia becoming a $3 trillion revenue company in the near future. If that happens in the coming years, then it is very plausible that Nvidia could one day be worth tens of trillions of dollars in market cap. That might sound crazy, but that's what Jensen is implying when he raises the possibility of Nvidia becoming a $3 trillion revenue company. I guess the question at that point is what multiple the street will be willing to give Nvidia. I don't know the answer to that question, but I truly do think that Nvidia will be worth much more in future years than it is today based purely on the fundamental growth of the business. Based on everything I'm seeing, the world is still computed and I expect that to continue at least through the first half of calendar 2028. In a computed environment, developers will use whatever viable compute they can get their hands on. Today, there are no GPUs that are sitting dark due to a lack of demand. Like there was fiber sitting dark due to a lack of demand at the height of the dotcom bubble. Back then, companies were laying fiber in the hopes that use cases and demand would eventually show up. Today, we are seeing the complete opposite. As I've said many times, when market participants compare this AI revolution to the dot bubble, they ignore the fact that the internet is already here this time. This means that mass adoption of the technology and new use case development at scale are immediately possible. We don't have to wait years for it to show up. It's already here. The world is compute constrained which means there is not enough supply to satisfy demand. New capacity is utilized as soon as it comes online. The hyperscalers are monetizing capacity as soon as it comes online. Each of the hyperscalers spoke about being supply constrained on their most recent earnings calls. Additionally, many of the clouds are building out into contracted demand. They're not blindly building in the hopes that demand will eventually show up. No, they're building out because they have signed contracts and in some cases significant prepayments from their paying customers. This AI revolution is fundamentally different from the dotcom bubble and 2026 will be a pivotal year for the AI industry thanks to the rapid adoption of agentic AI and the proliferation of agentic systems in the world's leading enterprises. The leading AI labs revenues are surging right now. Aentic coding and the implementation of agentic systems in large enterprises are new use cases that are increasing inference demand significantly that subsequently is increasing compute demand. The rapid adoption of agentic AI is why we're seeing an inflection in inference demand. It's why we're seeing the leading AI labs revenues surge. I wish both Anthropic and Open AI were public so the public could see the ramp in their revenues. I think the leading labs surging revenues may be the initial proof point that grabs market participants attention and causes them to realize that there will be a clear ROI on AI infrastructure. I think the leading labs surging revenues will also help assure investors of the longevity of Nvidia's growth since these labs revenues are directly tied to compute. If they had more compute, they would have greater revenues. It really is that simple. Demand is not the problem. The problem is a lack of supply to meet the demand. As I've said previously, I expect the world to be compute constrained at least through the first half of 2028, possibly longer. And so regardless of what happens in the short term, it's important for long-term investors to remain focused on the fundamentals, maintain a long-term perspective, and remember that we are only in the early stages of aic systems being adopted at scale. This will increase compute demand significantly, and after that, the next surge in compute demand will likely be fueled by physical AI. We're no longer talking about digital agents performing digital tasks. With physical AI, we're talking about physical AI agents performing physical tasks in the real world. NVIDIA CFO has called physical AI quote a multi- trillion dollar opportunity and the next leg of growth for NVIDIA. This industry will fundamentally transform society and Nvidia has positioned themselves to benefit massively. NVIDIA sells the hardware for the data centers where the models are trained. They offer omniverse where the models are taught and tested. And Nvidia also sells the hardware that allows ondevice real-time inference through Nvidia AGX, allowing robots to have intelligent interactions with the real world, even when they are not connected to a data center. Notice that Nvidia is taking a holistic platform approach to physical AI and they're embedding themselves as the underlying foundation supporting all of it. Over 3 million developers are already building on the Nvidia robotic stack, and this is not getting enough attention. As for production ramps, Blackwell Ultra has ramped and remains in high demand. Vera Rubin is rolling out to customers. Nvidia Gro 3 LPX is in full production. Later on, we're expecting the launch of Reuben Ultra in 2027 and Fineman after that in 2028. We have a clear data center product roadmap stretching into 2028. And Jensen believes that AI infrastructure spending will reach 3 to4 trillion annually by the end of the decade. That means Jensen is expecting growing AI demand and an expanding total addressable market underpinning all of this. I don't think we are anywhere near any type of bubble bursting type of event. With all of this in mind, I seriously think that Nvidia still has plenty of runway ahead of it. and I think this company will be worth substantially more in future years than it is today. At least that's my view of the situation. Quick note before I wrap up. All of the compilations on this channel are edited by Finn Vid with original structure and commentary. Occasionally the same edits appear elsewhere on YouTube. If you're looking for the original version, it's always here on this channel. Thanks for watching Finnvid. I appreciate your support. Remember to stay calm in this market. Remember to maintain a long-term perspective and do not make any hasty or irrational decisions. With all of that being said, I hope you all have a great rest of the day and I'm curious to hear your thoughts about Nvidia in the comments below. Please leave a like on this video so more people will see it. And while you're down there, please consider subscribing. It's free and you can always change your mind. Thanks for watching and hopefully I'll see you in the next