NVIDIA Q4 FY2024 Earnings

By Patrick Moorhead - February 26, 2024

The Six Five team discusses NVIDIA Q4 FY2024 Earnings.

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Daniel Newman: I started the show. I said, happy NVIDIA week. I started this week on Twitter, “Happy NVIDIA week.” It was actually more ridiculous than I thought it was going to be. The stock’s now trading at what, over $800 this morning. So they gained an AMD. They literally had a little bit of a pullback before and they grew by an AMD, $270 billion of market cap gain in the wake of its huge growth. What happened, Pat?

Patrick Moorhead: So first of all, it was definitely the circus. There literally were countdowns on the earnings coming up on CNBC, right? Kind of like days till Christmas or something like that that you would like as a kid. And I literally have not seen this exuberance since .com 1.0 when Cisco was essentially the NVIDIA. It’s miraculous. But hey, what did they do? I mean, they beat on revenue by 7.5%. They beat on EPS by about 11.5%, which by the way was the lowest beat percentage over the last four quarters. But it was the exuberance that the gravy train continues on.

And it looks to me like NVIDIA is becoming very much a retail stock. And the impact that has, it’s pluses and minuses. But when you grow by an AMD, after you beat by 8%, this is what happens. And it was no mystery when you look at the size of the different businesses that NVIDIA is in as they blew away data center, right? 18 billion. By the way, seven quarters before, data center was 3.8 billion. I mean, it’s just-

Daniel Newman: Same size as gaming, right?

Patrick Moorhead: Yeah, absolutely. Gaming, back in the first quarter of fiscal year ’23, it was 3.6 billion. So they were basically the same size. And since then, gaming has shrunk. They did have that quarter over quarter was the same, which isn’t great particularly because that was the holiday time period. But yeah, it was all about LLM, multimodal LLM inference and training. It’s so funny, CNBC was kind of wrecking their brain. I could tell like, “Hey, what do we talk about on this?” And they asked me about automotive. And absolutely no disrespect to the folks at NVIDIA automotive, but I just said, “Hey, in proportionality, you’re looking at a $280 million quarter versus an $18 billion quarter. And overall, a $22 billion quarter. It’s 1% of revenue. So inconsequential. And even Provis, at 463, is larger than automotive.”

And I think the big question, Dan, you and I got hit with this. And just weigh in on this. How long does this continue? And listen, current course and speed in competition that’s out there, on a percentage basis, Intel is going to lose percentage market share to AMD and to Intel and maybe even some of the ASIC startups. But when you have a rocket ship that’s growing like this, all companies can grow immensely in dollar proportionality, particularly NVIDIA. And Dan, that was the big basis of your piece that I don’t know if you published it yet on MarketWatch, but you and I had discussed this last night. What’s your take?

Daniel Newman: Listen, this is a perfect moment and a setup for a victory lap. When you get it right, you got to pat yourself on the back.

Patrick Moorhead: No, you got to do that. You have to.

Daniel Newman: I have an extensive op ed that’s going to come out. And I don’t want to spoil it for everyone out there that’s probably literally sitting at the edge of their chair being like, I wonder what Dan’s going to write next about NVIDIA. But let me tease it out for a minute. So in 2020, I said NVIDIA would be the next trillion dollar market cap company. The conditions were slightly different, but it was more based on two factors. It was the tie-up with Arm and the impending AI growth. In ’22 when the stock had fallen like $150, and by the way, it’s churning out 800 now. I went on CNBC and I got a lot of pushback from the hosts on the show. I was on Squawk Box, about why I said Microsoft and NVIDIA would be absolutely some of the best bets that people could make at that point merely because AI was going to come so fast, so furious. And nobody saw it.

I kept talking. Pat, remember how I talked about tech being inflationary? Well, AI is the most inflationary aspect of technology. Anything that enables you to do more with less people. Remember Altman and the billion dollar one person company that he keeps talking about. Well, now it’s almost the opposite, Pat. It’s like you get to the other side of this thing and it’s like once everybody’s getting on the bandwagon, it’s kind of time to step back and go, hmm. Now when everybody’s like, “Yes, buy, buy, buy.” This is like that inverse Kramer thing that everyone jokes about. By the way, someone showed a video yesterday of Kramer talking about shorting NVIDIA when it bottomed at $130. So this stuff is fun.

Patrick Moorhead: I mean, by the way, it’s fun to pile on Kramer, but-

Daniel Newman: No, no, no. I’m not piling on him, I just mean-

Patrick Moorhead: No, I know that.

Daniel Newman: It’s part of history. We pile on at all moments, Pat. What were you saying? Go ahead. Sorry.

Patrick Moorhead: No, no, no, I was just saying, rational people would be like, that totally makes sense.

Daniel Newman: Well, when things are going bad, the assumption is it’ll never get better. And when things are going well, the assumption is that it’ll never get worse. And both of those assessments are emphatically wrong. And so the real question, to your point, is how long does it continue? Well, you made a good, astute assessment that the growth is actually already slowing. Now, this is a law of large number of things. You could align it to the cloud numbers and their growth. Again, none had growth that was as astronomical as what we’re seeing here with NVIDIA. But NVIDIA has done this with effectively no competition. They’ve effectively had no meaningful competition. And so now over the next few quarters, for the first time, meaningful competition is popping up.

And the second kind of factor about competition is there seems to be a meaningful consensus among the competition that they know they need NVIDIA, but they also know NVIDIA is too strong. And so whether that was Satya Nadella talking about networking chips and basically developing chips that would enable data flow in Azure, that would not require as much dependence on NVIDIA. AWS already did this with its adoption of DGX Cloud. It did not use NVIDIA’s networking. You have Google GPUs, Meta’s developing its own chips, even though it’s the biggest buyer of NVIDIA chips. You have Oracle building with Ampere. You just kind of go up and down the stack. Everybody wants to build their own. And then you had AMD, of course, Lisa Su’s got this big forecast. And this is because there are companies that want to have a competitive choice.

And also, Pat, what does it mean with what Intel is doing, with what Sam Altman is suggesting? These are all very speculative, but clearly Sam Altman thinks we need an alternative. I mean, he’s not saying pour it all in and help NVIDIA get bigger. He is saying, let’s create an alternative. So you’ve got the different architectures, Pat. You’ve talked a little bit about FPGA, but definitely the ASIC architecture, very specific workloads on recommendations and filtering. Those are just a couple. For instance, you’ve got power requirement issues that are to be considered. And GPUs are good at a lot of things, but they’re not great at any one thing. That’s kind of how they’re designed, a lot like general purpose CPUs. So all these things are kind of just a series of conditions that say NVIDIA will keep growing and it’ll keep being successful, but not at the same rate.

And then when the rate slows down, investors, especially retail investors are fickle. Like, oh, they’re only growing. So that next quarter will be the first time that the company is growing on a year over year against the generative AI boom quarters. So what if next quarter after they grew 250% revenue a year ago, they only grow 25% over the 250%? People are going to be like, “Oh my God, it’s slowing.” It’s like, well, it’s actually growing really fast. And so these are all the conditions that I’m looking at saying, “Look, they’re doing great. It’s just different when competition rises. And these are real competitors. These are formidable companies.

And Pat, what about Apple? I mean, we haven’t even heard about what Apple’s going to do, but I seriously doubt they’re going to want to be, in their vertical integration strategy, as dependent on a single company as most of these cloud providers have been on NVIDIA.

Patrick Moorhead: Yeah, Apple recognizes they can’t replicate that in the cloud. But I got to tell you, their cloud spend is big. Apple used to do servers back in the day, but they don’t do it anymore. Hey, Dan, what would you think about, is there a potential acquisition play here?

Daniel Newman: Acquisition for who?

Patrick Moorhead: For NVIDIA. You got to keep the growth going and you don’t know how to.

Daniel Newman: I don’t think they can acquire anybody, Pat. I don’t see a circumstance. I think what they are doing that’s really smart is some of the seed investing that they’re doing in some of these very cool startups. They’ve got all this excess cash flow, Pat. They’re putting bets all over the market. It looks like a roulette table. There’s a hundred interesting startups. They’re probably putting money in 90 of them right now. And there’s going to create a loyalty and a commitment and access to technology and IP. I don’t see any circumstance in which they could make a big deal right now. Do you? Do you think they could do it?

Patrick Moorhead: It’s such a hard thing to answer, because you’re trying to get in the head of the regulators who are crazy right now, particularly over in Western Europe. So I got to say no in the current environment. Even if it has nothing to do with their current market, like buying a Qualcomm or something.

Daniel Newman: Too powerful.

Patrick Moorhead: Like that.

Daniel Newman: Too powerful.

Patrick Moorhead: Totally different markets. I got to tell you though, five years ago, that would’ve been a shoo-in when you look at the definition of markets. But again, we’re in this wacky time where big companies be bad just because they’re big.

Daniel Newman: Listen, you got to admire the success of NVIDIA. This is one of those where I’m not criticizing for the sake of criticizing. I’m just saying it’s gotten to the point where everybody’s on the bandwagon. And that always scares me. When everyone says it’s like an endless upward and to the right, you’re like, uh-oh. Same thing with the doubt. And everyone’s like, “This is never coming back.” You know, Pat, you like to devour history. You talk about that.

And when you read history, you do realize that there’s a reason that people make those statements about cycles and history repeating itself. And there’s kind of a cast of different reasons that happens. But one of them is because we’re stupid. As a society, we’re just stupid. Things happen. We see it happen and we let it happen again. And by the way, it’s kind of like that. You kind of wonder, are we actually that stupid or are we just being led on as a society? But, I don’t know.

Patrick Moorhead: Yeah, Dan, I know. Listen, this is an important topic, and I know we’re talking a long time about this. But what is unprecedented historically is that the big companies keep getting bigger. Every company had cycles where they would be dominant for about a decade. Probably the longest run of domination was IBM, and they’re still a very important company out there. But the dominance, I’ve never seen before. We had the run-up in Cisco. And yeah, they’re still dominant in networking, have a great business, but they’re not dominant overall. And Apple is the one that stymies me the most. Consumer electronics. Every 10 years a new company comes along, whether it’s Sony or-

Daniel Newman: LG, Samsung.

Patrick Moorhead: Toshiba what was dominant for a time as well. So out of one side of my mouth, the big company bad is odd to me. But then again, if you look at the concentrated value, isn’t NVIDIA worth more than all equities in China now, the entire China stock market?

Daniel Newman: Something like that. I don’t have that number in front of me, but we saw that it’s bigger than the entire S&P 500 energy sector, all the companies in it put together on market cap

Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.