Nvidia's Earnings Fortify Investors' Faith in AI Trade

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00:00I feel like Jensen Wang was trying to give the trifecta a positive picture on demand,

00:05positive picture on supply, and he even had the opportunity to kind of throw a bit of shade at

00:10ASICs or Google TPUs, saying that customers looked at alternatives and they came back to

00:15NVIDIA. There was a lot there. What is the most important data point to you?

00:21Hi, Ed. Good to see you. Perhaps maybe the most important one was that Jensen wasn't wearing his

00:27signature leather jacket. But for the most part, you know, for us, when you look at the financials

00:33and when you look at the growth rate that NVIDIA has posted and really delivering beyond expectations

00:41for where consensus estimates were, that was the most important metrics for us as we listened to

00:47the call. What I tried to do at the beginning of conversation was get a sense of how supply

00:51constrained they are and how conservative that $500 billion forecast through the end of next year

00:56is. Let's start there. Listen to this. Sales are off the charts for Blackwell and NVIDIA GPUs in the

01:07cloud are sold out. We got plenty of Blackwells to sell you. We have lots of Blackwells coming.

01:14We're making a lot of Blackwells and we have a bunch of Vera Rubens coming. And so

01:19business is very, very strong. Is that $500 billion figure, which excludes China and is Blackwell-Rubin

01:30through the end of calendar 26, a bit conservative? Well, we heard analysts ask that question, right?

01:38And they have visibility into that $500 billion number. And so that doesn't include sort of the

01:45demand that will be coming forward in the next, you know, 14 to 18 months. And so it perhaps is

01:52conservative. And I think that's the part that's so difficult for all of us to really wrap our heads

01:57around. These numbers are so large and they're growing at such a rate that we haven't seen before

02:02that it really becomes, you know, for most of us, we're all skeptical that this is going to happen

02:08at the rate that it continues to happen at. What was interesting was the depreciation question was

02:15tackled. This is what's got Michael Burry in a tizzy. It's got what many have been seeing as a little bit

02:20of anxiety that ultimately the consumers of NVIDIA chips have been saying that these last longer than

02:26some had anticipated. But really, it was made clear that the A100s, the older type of chips, are still

02:31working six years on, Ioka. Did that put that anxiety to bed? Yeah, I think it was a great way for

02:38Colette to sort of clap back at that depreciation argument. You know, we are still using these

02:45older chips. They are still getting consumed simply because the demand is so great. So I do think there

02:52was a little bit of that that was put to rest and a relief, I think, from investors to a certain extent

02:57that they were still being utilized to that extent. There's a relief today and we are up two

03:03percentage points, Ioka. But I feel as though the entire market is a bit of an anxious boyfriend at the

03:10moment trying to have soothing words currently given to it from whomever they can class as their AI girlfriend

03:16in many ways. But what are you thinking of in terms of that this will soothe for the longer term? Are we going to

03:21need weekly updates that we're not in some sort of bubble?

03:24You know, it is really difficult to sort of wrap our heads around. I think on one hand, we do see all of the demand

03:31continuing to grow at these exponential rates. But on the other hand, you see all this circularity and financing

03:38that I think concerns all of us. And then all of us who kind of grew up during the sort of tech bubble

03:44era, we've kind of seen this movie before and we don't want it to end the way that it ended back in 2000.

03:50And so there's a lot of push and pull and a lot of monitoring on a daily, weekly, quarterly basis.

03:56And I think that's why NVIDIA's earnings calls continue to be sort of the Super Bowl of, you know,

04:02equity investors sort of, you know, calendars.

04:07What about NVIDIA's valuation specifically? Do you feel comfortable with that?

04:13You know, it's trading at 28 times next year's numbers. It's growing revenue at 60%.

04:20It's growing earnings at 50 plus percent. You know, it's their reasonable valuations. They are not

04:27astronomical at like we saw during the tech bubble. However, you know, it's still relatively expensive.

04:34And it all hinges upon the duration of this growth rate. You know, does this continue at these levels

04:41for three, five years? Or is it just this sort of near term 12 month growth rate that we're seeing?

04:48And I think that's this anxious investor base that's sort of watching this.

04:53When does the growth rate start to deteriorate?

04:56Well, according to Bloomberg analysis, if you're looking at what the general consensus is,

05:02by 2028, revenue growth is going to have slowed to 26 percent.

05:06Just in 2027, it will have slowed to 45 percent.

05:09But is that just the law of ever greater numbers?

05:11I mean, we're already almost a five trillion dollar company.

05:14How can we expect it to keep growing at 60 percent out into 2028 and above?

05:19And I think that's the thing.

05:20That's the skepticism that really sort of creeps into, you know, the investor mindset is that

05:26how large can this get?

05:28And the numbers when you start to just grow at 60 percent plus year after year, it's just astronomical.

05:35And yet, you know, Jensen's talking about three to four trillion dollars of annual spend for data center and AI infrastructure.

05:44And and, you know, if all of that or a good portion of that goes to NVIDIA, the numbers continue to grow.

05:51And then, you know, the hyperscalers will grow as well because that benefits their cloud revenue.

05:56So it's just something that we continue to keep monitoring and we'll have to see each quarter, not just from NVIDIA,

06:03but from all of the tech ecosystem in terms of how large this AI platform is going to become.

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