00:00The world's most valuable company, U.S. chipmaker NVIDIA, just released their second quarter earnings,
00:05reporting nearly 47 billion U.S. dollars in revenue, slightly beating analyst estimates.
00:11And yet their stock was down 3% in extended trading. Bob, what's going on here?
00:16Well, look, the challenge with NVIDIA now is we're hitting the law of big numbers,
00:23meaning as you get to income levels that they're hitting nearly $50 billion a quarter,
00:28it becomes impossible to have large percentage growth.
00:33And so many people are focused on percentage growth.
00:36And realistically, that's just not going to happen.
00:39And I think the biggest factor for this quarter for NVIDIA is the fact that
00:42even though they had extraordinarily strong growth,
00:45there was a slight miss in data center infrastructure income.
00:50And so I think people are really focusing on that because there have been a whole bunch of people
00:55waiting for the AI bubble to burst.
00:58And so they're looking for any possible sign that that could happen.
01:02So unfortunately, it's a question of just completely unrealistic expectations.
01:06You can't continue blowing out earnings when you're at this level.
01:10And I think that's the market reality.
01:12NVIDIA reported no China sales of its H20 chip in Q2.
01:16That's a chip that was designed specifically for the China market to comply with U.S. chip export rules.
01:22They also excluded H20 sales from their Q3 outlook
01:26and have reportedly asked partners like Foxconn to cease production on that chip.
01:31So is the H20 effectively dead?
01:33No, I don't.
01:34Well, I mean, it may be that the H20 is dead because quite honestly,
01:37there's also been a lot of discussion about the fact that
01:39NVIDIA already has a successor to the H20.
01:43So, but I think the notion of selling something to China,
01:47whether it's the H20 or the successor, has not completely gone away.
01:50It's clearly paused right now.
01:52The fact that NVIDIA had zero for China when China used to be a big part of their income,
01:59and yet they still did as well as they did,
02:01shows you just kind of how crazy to think that this AI bubble is over, right?
02:06If you had thrown in even a little bit of China income,
02:09they would have blown away the quarter, right?
02:11Or they certainly would have had a bigger blowout or a bigger set of numbers than they currently had.
02:16So, you know, the potential upside of China on top of all the growth that they're still expecting without China,
02:25tells you that, look, there's still plenty of opportunity here.
02:29NVIDIA made no China sales of the H20, but they did sell about $650 million of H20s to a customer outside of China.
02:36What kind of customers would be interested in this ostensibly China-only chip?
02:41Well, there's plenty of people theoretically who could use it.
02:44Again, I mean, you could see, first of all, you could see other countries around the world.
02:49Everybody's trying to do their own sovereign AI, right?
02:52Sovereign AI has become a big thing where countries around the world want to build their own data centers.
02:57They don't want to rely necessarily on just U.S.-based hyperscalers.
03:01So there are plenty of other countries around the world where that's probably being purchased.
03:08Not everybody has to have the latest chips.
03:10The biggest guys do, but, you know, smaller countries, countries just starting doing an AI build-out, enterprises themselves,
03:18there's plenty of demand for, you know, not, you know, N-1, as they say, chips.
03:25And that's what you've got with the H20.
Comments