WEBVTT - Instant Reaction: Nvidia Forecast Shatters Estimates

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Let's get through it, guys.

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<v Speaker 1>We've got a bunch of numbers, and we do have

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<v Speaker 1>the stock shares of Nvidia up about four percent in

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<v Speaker 1>the after hours, the big things announcing a ten for

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<v Speaker 1>one forward stock split. And to the outlook we talked

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<v Speaker 1>with our Ian King. This is going to be important.

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<v Speaker 1>See second quarter revenue twenty eight billion plus or minus

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<v Speaker 1>two percent. The estimate is twenty six point eight billion.

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<v Speaker 1>Remember though the whisper number that Ian mentioned was about

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<v Speaker 1>thirty billion or above.

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<v Speaker 2>Billions on the range. We're saying up to thirty billion dollars,

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<v Speaker 2>but it's interesting, higher than the consensus.

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<v Speaker 1>Absolutely, but you know, it can be funny with that

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<v Speaker 1>first quarter data revenue. This is important. This is the

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<v Speaker 1>bulk of their business, right, twenty two point six billion.

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<v Speaker 1>That is above street estimates of twenty one point thirteen billion.

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<v Speaker 1>Gaming revenue much smaller part of the business. First quarter

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<v Speaker 1>gaming revenue that was pretty much in line. Two point

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<v Speaker 1>six billion. The estimate was for two point sixty two billion.

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<v Speaker 1>And again the company boosting the quarter cash dividend to

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<v Speaker 1>ten cents a share from four cents a share, so

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<v Speaker 1>really paying back all of that cash that they've been

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<v Speaker 1>generating a lot of it right giving it back to investors.

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<v Speaker 2>Shares up right now about four point four percent. They

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<v Speaker 2>climbed as much as five point one percent after that

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<v Speaker 2>second quarter revenue. I looked topped estimates. You heard the

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<v Speaker 2>numbers too there about its data center business. It did

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<v Speaker 2>well in the fiscal first quarter. Revenues came in of

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<v Speaker 2>twenty came in at twenty two point six billion. They

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<v Speaker 2>were above the data center consensus of twenty one point

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<v Speaker 2>one to three and then of course that ten for

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<v Speaker 2>one forward stock split. Huge news.

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<v Speaker 1>Well, and you use something you focused on earlier. Adjusted

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<v Speaker 1>gross margin for the first quarter seventy eight point nine

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<v Speaker 1>percent versus sixty six point eight percent year over year.

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<v Speaker 1>The estimate on the street was seventy seven percent, So

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<v Speaker 1>that's coming in higher than forecast R and D expenses

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<v Speaker 1>two point seventy two billion, That is up forty five

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<v Speaker 1>percent year over year. The estimate was for two point

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<v Speaker 1>seven three billion, so a little bit lower. For the

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<v Speaker 1>full year, gross margins are expected to be the mid

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<v Speaker 1>seventy percent rate. Full your operating expenses are expected to

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<v Speaker 1>grow in the low forty percent range, so we're getting

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<v Speaker 1>some view and some thoughts in terms of the outlook.

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<v Speaker 1>Right now, we've got cheers of Nvidia. They are up

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<v Speaker 1>four point four percent in the after hour, and the

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<v Speaker 1>company says it's poised for their next wave of growth.

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<v Speaker 2>Ian King writing on the live blog right now that

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<v Speaker 2>the twenty eight billion dollar revenue forecasts solidly above the

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<v Speaker 2>CONCESSUS estimate, but as you mentioned, Carol, not as wildly

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<v Speaker 2>optimistic as some projections, which had ranged to more than

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<v Speaker 2>thirty billion dollars. Stock splits Ian Ads, in in Vidia's case,

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<v Speaker 2>a ten for one exchange are usually done by companies

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<v Speaker 2>to keep their shares affordable by as many investors as possible.

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<v Speaker 2>This one, in notes is going to come into effect

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<v Speaker 2>in a little less than a month that on June seventh.

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<v Speaker 2>You could argue that stock splits don't matter as much

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<v Speaker 2>anymore because you can just buy fractional shares easily.

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<v Speaker 1>That's a good point, all right, So let's get to it.

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<v Speaker 1>Let's get some analysis on this report. Dan Morgan is

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<v Speaker 1>with US senior portfolio manager at Sonovs Trust Company, joining

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<v Speaker 1>us from Atlanta. Also Kujohn Sabani Bloomberg Intelligence Senior Semiconductor

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<v Speaker 1>lets Dan, let's start with you your initial thoughts on

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<v Speaker 1>the release.

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<v Speaker 3>All right, Tim, Hi, Carol. Quite frankly, I thought it

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<v Speaker 3>was a fantastic quarter. I mean, Ian King, who I

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<v Speaker 3>know very well, mentioned a whisper number at thirty billion

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<v Speaker 3>dollars in revenues.

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<v Speaker 4>I was hearing more close to twenty six billion.

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<v Speaker 3>So obviously they you know, came in above that twenty

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<v Speaker 3>six point eight. The beat in data center is really important.

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<v Speaker 3>Obviously they came in at twenty two point six billion.

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<v Speaker 4>That was a beat.

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<v Speaker 3>And Carol and Tim, you know, heading into this report,

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<v Speaker 3>we had a lot of people out there who were

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<v Speaker 3>very concerned that there would be some sort of like

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<v Speaker 3>air pocket between ordering patterns with the current chips that

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<v Speaker 3>they're shipping, which are the Hopper series, and that there'd

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<v Speaker 3>be some large customers that would hold off and wait

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<v Speaker 3>intil the new Blackwell series was introduced sometime this fall,

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<v Speaker 3>and then we would get some sort of slower period

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<v Speaker 3>and growth in terms of data center revenues and the

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<v Speaker 3>Really there is no indication of that on this current quarter.

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<v Speaker 4>So hopefully this quarter will be able to answer back

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<v Speaker 4>to some of those worries.

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<v Speaker 3>And I thought across the board and you know, quite frankly,

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<v Speaker 3>guys at ten for one stock sport is absolutely huge

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<v Speaker 3>because like Amazon and Google and they both did twenty

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<v Speaker 3>four one stock sports.

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<v Speaker 4>Yeah, it really allows the retail.

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<v Speaker 3>Investor to participate more in terms of buying more shares

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<v Speaker 3>and it's a psychological thing, but it does boost the stock.

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<v Speaker 5>Hey.

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<v Speaker 1>I just also one eye popping number free cash flow.

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<v Speaker 1>Maybe this is why they're doing that dividend and so on.

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<v Speaker 1>Free cash flow fourteen point nine four billion dollars versus

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<v Speaker 1>two point sixty four billion year over year, the estimates

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<v Speaker 1>for twelve point two nine billion, So yeah, generating some stay.

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<v Speaker 2>Looking really good. I want to bring in Kun John Savanni,

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<v Speaker 2>Bloomberg Intelligence senior semiconductor analysts. Kunjohn just build on what

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<v Speaker 2>we heard from Den Morgan. There is there anything in

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<v Speaker 2>this in this most recent report from Nvidia that investors

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<v Speaker 2>shouldn't love.

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<v Speaker 5>I mean, look, the dividend increases massive, more than hundred percent,

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<v Speaker 5>and the stock split I think not a negative, but

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<v Speaker 5>the expectation was for a sort of low double digit

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<v Speaker 5>at least beat on both the print and the guide.

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<v Speaker 5>We didn't see that this one. For the past many

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<v Speaker 5>quarters we have seen beats and raises in that range.

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<v Speaker 5>So in the absence of the dividend increase in the

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<v Speaker 5>stock split, we could have seen some volatility here because

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<v Speaker 5>again it was good, but not as good as people expect.

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<v Speaker 5>But I think in the call the dividend free cash

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<v Speaker 5>flow in the split will be center stage.

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<v Speaker 1>Well, Ku, John, I do wonder is there anything in

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<v Speaker 1>it that makes us like reset our think and enthusiasm

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<v Speaker 1>as investors that we have seen when it comes to

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<v Speaker 1>kind of the AI investment story, because Nvidia obviously the

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<v Speaker 1>lynchpin if you will, to so much of it when

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<v Speaker 1>we talk about AI, right, if you're going to do AI,

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<v Speaker 1>you need and video chips. So is there anything in

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<v Speaker 1>this report that makes you rethink the expectations about the

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<v Speaker 1>impact of ai jen ai and all that it might bring.

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<v Speaker 1>And also as an investment story.

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<v Speaker 5>Not really, you know, from a long term perspective, the

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<v Speaker 5>fundamentals remain intact, the story remain intact. We were expecting

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<v Speaker 5>some kind of you know, some folks are calling it

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<v Speaker 5>the air pocket in this next quarter and the quarter

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<v Speaker 5>coming in October is just a temporary timing situation where

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<v Speaker 5>the new black Well chip starts ramping and before that

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<v Speaker 5>customers wants to wait for that. So what you might

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<v Speaker 5>see and V are seeing a sort of moderating sequential growth,

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<v Speaker 5>But I don't think that should lead to any concerns

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<v Speaker 5>whether this AI rally has legs or not.

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<v Speaker 1>Jensen Wong in the press release, of course, the founder

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<v Speaker 1>and CEO n Vidio, saying our data center growth was

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<v Speaker 1>fueled by strong and accelerating demand for generative AI training

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<v Speaker 1>and inference on the hyper platform. Beyond cloud service providers,

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<v Speaker 1>generative AI has expanded to consumer internet companies and enterprise

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<v Speaker 1>sovereign AI, automotive and healthcare customers, creating multiple multi billion

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<v Speaker 1>dollar vertical markets. So, Dan Morgan, I mean, what are

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<v Speaker 1>you hearing in terms of channel checks? Johnson Wang, No surprise,

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<v Speaker 1>He's going to be all in. This is his bread

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<v Speaker 1>and butter. But it does sound like it's broadening out

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<v Speaker 1>in terms of the demand. Everyone trying to figure out

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<v Speaker 1>what their AI play is for their business.

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<v Speaker 3>You're right, Carol, And you know, if you look at

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<v Speaker 3>kind of going back to that pocket issue. Coming into

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<v Speaker 3>this quarter, estimates were that the Hopper one Hunter chip

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<v Speaker 3>had about a ten days or ten week lag time

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<v Speaker 3>between order periods, so there's still some slight overage of

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<v Speaker 3>orders in that and they're trying to meet that. But

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<v Speaker 3>you're right, Carol and Tim, it looks like we're spilling over.

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<v Speaker 3>You know, we've been following the stock together, it seems

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<v Speaker 3>like for five or six years on the radio show,

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<v Speaker 3>and we've gone from a gaming company to a data

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<v Speaker 3>center company, and now we're seeing it going from the

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<v Speaker 3>data center into these other areas.

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<v Speaker 2>There was a little crypto mining in there, just unimaginable.

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<v Speaker 4>I'm sorry to there was.

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<v Speaker 2>A little crypto mining in there too during that time, Dane.

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<v Speaker 4>I had some crypto mining going in there for a

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<v Speaker 4>while too.

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<v Speaker 3>But you know, it's just amazing, Timmy Carroll that you know,

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<v Speaker 3>before it was really a data center story using GPU

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<v Speaker 3>chips in terms of AI, and now, like you mentioned

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<v Speaker 3>in the press release, it's now spilling over into all

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<v Speaker 3>aspects of different industry.

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<v Speaker 4>So it just increases the.

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<v Speaker 3>Amount of potential customers just beyond the big data center

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<v Speaker 3>users that we keep talking to block aws and GCP

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<v Speaker 3>and ASER and it just becomes a bigger and bigger story.

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<v Speaker 2>Well, it raises the question, Kunjon, that I've had for

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<v Speaker 2>months at this point, which is the whole basic thesis

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<v Speaker 2>of successful companies that are building something at high margin

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<v Speaker 2>and if they're the only ones doing it, then there's

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<v Speaker 2>something wrong with it, or they at least have like

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<v Speaker 2>an incredible mode. And I'm wondering how long in Nvidia

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<v Speaker 2>can keep doing this. I mean, they've got first quarter

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<v Speaker 2>just a gross margin of seventy eight point nine percent.

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<v Speaker 2>Estimates were for seventy seven percent. How long can Nvidia

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<v Speaker 2>keep doing this before a competitor is able to build

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<v Speaker 2>something similar or catch up.

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<v Speaker 5>I don't have an answer for how long, but I will,

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<v Speaker 5>you know, last before the Blackwell announcement, before GDC, this

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<v Speaker 5>was the exact questions we were getting a lot and

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<v Speaker 5>the question was like after H one hundreds or H

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<v Speaker 5>two hundred, will the next chip be competitive and provide

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<v Speaker 5>a lot more of value that they can continue demanding

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<v Speaker 5>such premium. And the Blackwell is showing that yes, in

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<v Speaker 5>terms of performance increases, in terms of TCO for their customers.

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<v Speaker 5>It came out and beat every other product or the

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<v Speaker 5>wanna be products in the street, and hence that is

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<v Speaker 5>going to command even more premium. So I think as

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<v Speaker 5>long as they can keep on out competing themselves and

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<v Speaker 5>their peers, they should be able to command this premium.

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<v Speaker 1>So in video shares just to rehash, well, they're off

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<v Speaker 1>their highs in the aftermarket, but still up about two

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<v Speaker 1>point seven percent as we speak. And just to kind

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<v Speaker 1>of go over some of the headlines that did cross

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<v Speaker 1>just moments ago again and Video giving a strong forecast

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<v Speaker 1>on sustained AI momentum, specifically, just going through some of

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<v Speaker 1>the numbers here, boosting its quarterly cash dividend to ten

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<v Speaker 1>cents of share from four cents of share. We talked

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<v Speaker 1>about that ten for one forward stock split again. Data

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<v Speaker 1>Center revenue for the first quarter the past quarter twenty

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<v Speaker 1>two point six billion, that's a beat. Twenty one point

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<v Speaker 1>thirteen billion was the estimate, and then the outlooks the

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<v Speaker 1>second quarter revenue twenty eight billion plus or minus two percent,

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<v Speaker 1>and the estimate on the street is below that at

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<v Speaker 1>twenty six point eight billion. So Dan like, where do

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<v Speaker 1>we go here from in terms of Nvidia? Does it

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<v Speaker 1>kind of make sense based on the spending that we

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<v Speaker 1>heard from the likes of you know, Alphabet, I feel

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<v Speaker 1>like Microsoft, was it Apple, was it Metal? Like they

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<v Speaker 1>all kind of talked about right cap spend when it

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<v Speaker 1>comes to AI specifically, So the enthusiasm maybe we've heard

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<v Speaker 1>through the earning season from some of the big tech players.

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<v Speaker 1>Does it match up with what we got from Nvidia?

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<v Speaker 4>I think so, Carol.

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<v Speaker 3>You know, the estimate going into the two thousand or

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<v Speaker 3>physical year twenty twenty four, if we were to take

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<v Speaker 3>meta Microsoft, Amazon, and Google and combine their campex that

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<v Speaker 3>they're mostly dedicated towards AI, you're looking at about one

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<v Speaker 3>hundred and eighty one hundred and eighty five billion dollars.

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<v Speaker 3>So it's a huge number, and most of them have

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<v Speaker 3>very healthy CAMPEX.

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<v Speaker 4>Expectations going into this year, and of course everyone's scrambling

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<v Speaker 4>to outdo each other in terms of AI initiatives.

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<v Speaker 3>So, you know, Caroll and Tim, this report just keeps

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<v Speaker 3>reiterating the amount of spending that's going into this and

0:11:43.760 --> 0:11:45.960
<v Speaker 3>of course and videos are kind of waiting with their

0:11:46.000 --> 0:11:48.680
<v Speaker 3>catcher's mitt and catching a large portion of it.

0:11:48.800 --> 0:11:51.440
<v Speaker 4>So I don't see any changes right now.

0:11:51.600 --> 0:11:54.880
<v Speaker 3>Based on the campex guidance that we got at the

0:11:54.880 --> 0:11:57.880
<v Speaker 3>beginning of the first quarter from the big tech names,

0:11:58.280 --> 0:12:01.160
<v Speaker 3>and then in Nvidia coming in with this beat and

0:12:01.200 --> 0:12:04.960
<v Speaker 3>then also strong guidance for the second quarter twenty five,

0:12:05.000 --> 0:12:08.719
<v Speaker 3>they did come in above expectations. So maybe that'll put

0:12:08.760 --> 0:12:11.960
<v Speaker 3>the bed some of these worries about this transition that

0:12:12.000 --> 0:12:15.439
<v Speaker 3>we talked about between Hopper and Blackwell as we move

0:12:15.480 --> 0:12:18.959
<v Speaker 3>into the fall quarter, and you would expect those quarters

0:12:18.960 --> 0:12:22.760
<v Speaker 3>to be huge anticipation of the fact that they'll have

0:12:22.800 --> 0:12:25.240
<v Speaker 3>a new product cycle going and starting to.

0:12:25.160 --> 0:12:26.280
<v Speaker 4>Shift the new Blackwell.

0:12:26.400 --> 0:12:29.920
<v Speaker 3>So to me, everything's operating on all cylinders right now.

0:12:29.960 --> 0:12:30.520
<v Speaker 4>Front Video.

0:12:30.679 --> 0:12:33.960
<v Speaker 2>Hey, Kunjohn, before we let you go, twenty five minutes

0:12:34.000 --> 0:12:39.320
<v Speaker 2>to go until the call starts for in video, shareholders, investors,

0:12:39.600 --> 0:12:42.360
<v Speaker 2>and of course analysts as well like yourself. What's the

0:12:42.440 --> 0:12:46.160
<v Speaker 2>question that you'd want to ask on the call today.

0:12:46.280 --> 0:12:48.560
<v Speaker 5>Yeah, a couple of things. Just again going through the

0:12:48.559 --> 0:12:51.440
<v Speaker 5>press release right now. One key thing we noticed this

0:12:51.520 --> 0:12:54.679
<v Speaker 5>time was that the cloud customers are now somewhere between

0:12:55.000 --> 0:12:59.240
<v Speaker 5>mid forties. Until last quarter they have been above fifty

0:12:59.280 --> 0:13:03.000
<v Speaker 5>percentage of data center revenue, So that is interesting. You know,

0:13:03.120 --> 0:13:06.040
<v Speaker 5>we think in terms of long term that's a positive

0:13:06.480 --> 0:13:12.200
<v Speaker 5>because we do want that cloud concentration to moderate along

0:13:12.240 --> 0:13:14.840
<v Speaker 5>with revenue growth, so that could be a long term positive.

0:13:14.840 --> 0:13:17.280
<v Speaker 5>We'll have to get more details on what droped that was.

0:13:17.320 --> 0:13:19.680
<v Speaker 5>It just that the cloud customers are going with more

0:13:19.679 --> 0:13:21.680
<v Speaker 5>of their own a six, so that would be something

0:13:21.720 --> 0:13:23.160
<v Speaker 5>important that we are going to look out for.

0:13:23.360 --> 0:13:25.440
<v Speaker 1>All right, great, and so after the call we go

0:13:25.600 --> 0:13:28.160
<v Speaker 1>all right. Shares of Nvidia right now up about two

0:13:28.200 --> 0:13:31.120
<v Speaker 1>point four percent here in the aftermarket thanks to our ku.

0:13:31.240 --> 0:13:34.559
<v Speaker 1>John Sabani Bloomberg Intelligence senior semiconductor analysts will be watching

0:13:34.559 --> 0:13:37.640
<v Speaker 1>out for his research into the Thursday trade. Dan Morgan

0:13:37.800 --> 0:13:41.600
<v Speaker 1>also watching out for his research as now that we've

0:13:41.600 --> 0:13:44.000
<v Speaker 1>got all the details if you will, from Nvidia. He,

0:13:44.080 --> 0:13:46.880
<v Speaker 1>of course, senior portfolio manager at Sonova's trust company.