Nvidia: Can It Maintain Growth?
• Nvidia invented the GPU in 1999.
• Including GPUs and networking, NVIDIA powers over 75% of the supercomputers on the global TOP500 list.
• Nvidia’s chips enable discovery, from climate prediction to materials science and from wind tunnel simulation to genomics.
History & Guidance
Revenue last quarter hit $44 billion, up 69% YoY. Data Center revenue, $39 billion of the total, was up 73% YoY with the release of Blackwell, which comprised 70% of Data Center revenue for the quarter. For the last year, Networking revenue was $5 billion, up 56% YoY, and gaming rose 42% from the year ago quarter to $3.8 billion. Operating expenses rose by 44% in fiscal 2024 compared to 2023, and operating income increased by 147% that year, above revenues 114% growth. Inventory doubled from 2023 to 2024, but as a percentage of revenue it declined from 8% to 7%. Revenue was guided at $45 billion, affected by the loss of the chinese market due to export restrictions enacted on April 9.
Valuation
Nvidia trades at 50X TTM earnings, and roughly 30X TTM sales. Forward numbers are highly uncertain as growth could be almost anything in the next year.
Management
CEO Jensen Huang needs no introduction, and the CFO Colette Kress has served as CFO since 2013, holding high level positions at Microsoft and Cisco before that.
Shareholder Return Programs
The company pays a one cent quarterly dividend, and has bought back $33 billion worth of stock in 2024, and about $10 billion in 2023 and 2022. In Q1, NVDA bought back $14 billion worth of stock, and all indications are that such buybacks will continue.
Conclusion
Nvidia faces stiff competition from AMD, risks from Chinese innovators, chips made by the cloud hyperscalers, and the dark horse - Intel. In addition, demand for chips is highly volatile, and a sudden change in orders such as in 2019 due to the crypto bust, could leave looking very expensive. On the other side, the opportunity is potentially in the hundreds of billions of dollars yearly of chip revenue. If Nvidia is able to keep 75%+ market share this will lead to tremendous returns for shareholders. Personally, there are more attractive places to deploy my capital, but I would certainly consider NVIDIA on a significant dip. Thank You for reading!
Disclosures: This is not investment advice. Past Performance is no guarantee of future results. The writer shall not be held liable for any losses caused by taking positions in securities discussed. The writer may have positions in, or trade in securities mentioned. The writer does not hold a position in NVDA.