Nvidia's Blockbuster Run Is Just Getting Started

Nvidia shares once again powering higher in the wake of that Blockbuster earnings report last week the stock up more than 100% year-to date and sales skyrocketing 262 for a record $26 billion astounding the company forecasting the growth will continue anticipating record sales of 28 billion in the current quarter here to break down more about what's going on with the company is Andrew Chang technology director at S&P Global ratings good to see you sir um we haven't spoken to you since that monster number so your your reaction uh at this point yeah thank you for having me I would say the air pocket that investors were concerned about uh is unlikely to materialize given their comments in the earnings call the h100 demand is still very strong uh certainly sustainable through the age2 200 shipping now and we think a very good chance that it continues into Blackwell which will ship at the end of this year and it confirms the comments made by their customers primarily the hyperscalers like Amazon and Microsoft like large internet companies like meta they're upping their AI capex to meet demand well important to point out that it is expected demand U but nevertheless uh this confirms the view from the customers and uh we also like the additional color uh on the Enterprise Tesla for example and on The Sovereign I think they mentioned Japan Italy Singapore so these were all great data points that there is likely to be a sustainable demand not just over the next year but probably for the next two years interesting Andrew and we had seen the stock pull back a little bit at the start of the session but now fractionally on the day another record high for NVIDIA we'll see whether or not that can ultimately turn the NASDAQ positive here is an intraday chart shares up 4/10 of a perc I I saw that your firm recently raised its credit rating to a double A minus on Nvidia what was behind that decision sure yeah and this was done at the end of April so about a month ago prior to the earnings release um ultimately we appreciate the significant technology lead that the company has built over the past decade uh alongside this great product execution from Hopper to likely Blackwell um and we view Nvidia uh as a platform company not a chip company not just a GPU maker but they also make Hardware a networking included they have a full rack scale solution and most importantly software which they've developed over the past decade and that makes uh that makes their competitive mode very wide and and it becomes difficult for competition to catch up um we at S&P also view that AI is a significant Market opportunity we forecast that AI spending will go from less than 200 billion in 2023 to about 650 billion by 2028 so about a 30% ker over a 5year horizon and clearly Nvidia will outgrow that by by a country mile um so we upped our revenue forecast cash flow forecast and frankly that number is already scale uh stale sorry given the really strong earnings release sounds like you just answered this in a sense but to those who say it's time to take some profits what would you say well I can only speak from a cred perspective but from a credit side the rating upgrade reflects that this we view this as a long-term growth opportunity now the growth will not be up and to the right every quarter every year there could be a pause there could be digestion by customers but all in all we see a very growth a very strong growth Prospect for the next four or five years uh and Nvidia is clearly the biggest Market beneficiary Here Andrew you mentioned other plays in the AI space that could benefit from this as well what are those companies sure some of the names that come to mind is a broad fund for example which from a revenue perspective will be the second largest beneficiary from the semiconductor side another company like Micron a big Memory Maker which will benefit from from selling into uh GPU selling into Nvidia through their hbm or high band with memory so there are multiple companies in the semis side Marvel as well uh AMD Intel to a lesser extent but there are many companies in the semis side who will all benefit uh this is a rising tide that's going to lift many boats in our view indeed and when you look at the AI game I don't know if you're a baseball or a football guy or neither but what what inning are we in what quarter are we in overall great question uh given our five-year forecast I would say we are in inning two probably uh not even a start of beginning of inning three so we have long ways to go before we see the market maturing and slowing down meaningfully again that said I want to point out from a credit perspective that this is not going to be a smooth up into the right type of an event there will be Cycles um you know Nvidia has had Cycles semiconductor industry at large goes to recycles so you you'll see some bumps here and there but along the way there there should be over the longer term very strong growth very strong growth obviously Andrew you and your firm are very bullish but I'm sure there are risks what are some of those risks sure the the obvious one being the potential short-term uh swing in demand it could be a Microsoft or it could be meta saying hey we bought too much or the demand is not as robust as we expected so we're going to pause and we call that digestion that that could last two three quarters um another is again competition among uh AMD Intel type of companies and competition from customers um Amazon and microsofts of the world are developing their own chips uh they frankly can't be too excited about Nvidia posting these type of numbers that's all their cash going to Nvidia so they're going to make sure they get a piece of that pie and diversify their supplier base uh there's Al also the supplier concentration issue which is frankly a tail risk a remote risk but something that bears monitoring in that tsmc in Taiwan is their primary foundary provider um and they have 90% tsmc has 90% of their leading Fabs Advanced Fabs in Taiwan that's that's a risk that's there's a geopolitical risk water risk energy risk so that you know we can there laundry of list of risk that we are monitoring but certainly Nvidia is navigating uh you know well through through these potential risks on the geopolitical front Andrew how could the recent tariffs announced by the Biden Administration benefit a company like Nvidia uh Nvidia is unlikely to benefit from the Tariff at this point um you know the the exports to China have already shrunk to a small pretty small portion of their over overall Revenue base and whenever there's a tariff I think is bad for the entire semi and Tech ecosystem so if we see a trade War ramp up you do not think that that would benefit Nvidia is that the case yes I mean as of today they're growing despite the lack of exports to China because the supply is not sufficient to meet demand should there be any tariff or trade War escalating over time you know it remains to be seen if a valued uh in short Supply commodity like GP will be head Jensen Wong uh the man behind the curtain what makes him so unique in the space well I would say that he had the vision it's easy to say today but in hindsight that he had the vision to go after an opportunity that didn't exist he created a new market a GPU Market again that didn't exist uh and went through a period from a credit perspective where company wasn't generating Cash Company wasn't doing well but he still held on to this idea of a broad platform company combining GPU Hardware software which again had not been done until Nvidia came along so you know he's a Visionary and again there there were some painful periods during that time but looking at it today it was it was a great call Andrew we appreciate your time thank you for joining that's Andrew Chang technology director at S&P Global ratings

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Length: 8min 26sec (506 seconds)

Published: Wed May 29 2024