TOP STORY
🚀 Nvidia Jumps 5% After Smashing Earnings Expectations

🐝 Nvidia ($NVDA) just reported earnings, so it’s time for a special edition Weekly Buzz breaking them down!

😰 With ever-growing calls that the stock market is in a bubble, concerns over circular deals, and even the famous ‘Big Short’ Michael Burry taking out a $200B bet on Nvidia, a lot was riding on today’s earnings call…

🚀 The high level? Nvidia crushed it, beating the already very high expectations set by analysts, driving the stock up 5% after hours, and most importantly, letting investors breathe a big sigh of relief 😮‍💨

🤿 So let’s dive into the numbers and the highlights, and then talk about why, even with these blowout earnings, the worries about an AI-bubble aren’t necessarily in the rear-view mirror:

🤑 Nvidia Crushes Already Lofty Revenue Targets by 4%

• 💰 Revenue: $57B, up 63% from last year, and 3.8% higher than analysts expected

• 🎯 Forward Revenue Targets: $65B, 5.4% higher than analysts expected

• 💸 Earnings per Share: $1.3, up 66.7% a year ago and 4% higher than analysts expected

🤯 Those are some crazy good numbers… and to sum things up, Jensen Huang had this to say:

📈 Revenue Growth Accelerates

Some of you might remember this scary chart from last quarter, which showed that even though Nvidia has posted incredible >50% growth for 9 straight quarters, the growth rate was decelerating…

Well, that downtrend reversed this quarter, with 63% YoY growth marking a clear uptick, and the 65% YoY growth expected next quarter continuing the new trend.

🔥 This means Nvidia isn’t just growing, but growth is accelerating - a really strong signal for investors.

🔦 Blackwell Ultra Steals the Spotlight

So what’s caused this incredible reversal?

Well, the most important business line for Nvidia is its AI-driven data-centre business, which hit $51.2B - now accounting for nearly 90% of Nvidia’s business (up from 41% just 4 years ago).

This data-centre revenue, which is mostly GPU sales, soared 66% as Nvidia’s customers upgrade to its new Blackwell Ultras (a chip line-up launched in March), which has quickly become Nvidia’s best-selling chips.

⭐️ The ramp of Blackwell really highlights one of the beautiful aspects of Nvidia’s business. With the pace of advancement in AI chips, Nvidia’s Hopper chips (which came before Blackwell) have almost become ‘obsolete’, and to stay on the cutting edge, all the AI leaders like OpenAI, Anthropic, Meta, etc., need to buy the latest and greatest so they don’t fall behind.

💰 And with all the AI leaders accelerating their AI spending and capex targets, this shows no sign of slowing anytime soon, with Jensen Huang saying the company has $500B in orders for 2025 and 2026.

🫧 So does this mean the bubble worries are officially over? Well, not really… but before we talk about that, a quick word from this week’s sponsor Global X!

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TOP STORY CONT.
🫧 Why the Bubble Worries Aren’t Necessarily Over (Depending on Who You Ask)

⚠️ With such a blowout earnings report, it may seem silly to talk about a bubble, but I think it’s very important for us investors not to be blind to the risks in the market.

👀 And with many high-profile investors starting to bet against the market or cash out (like Peter Thiel, who recently sold his entire stake in Nvidia), it’s worth paying attention to what the counterarguments are against the AI hype.

⚱️ Nvidia Sells The Shovels, But People Only Buy Shovels If There’s Gold

The thing is, it shouldn’t be much of a surprise that Nvidia crushed earnings. Right now, the market is in an AI gold rush and Nvidia’s GPUs are the shovels big-tech needs to pan for gold.

But the concern is that the ‘gold’ won’t be found. In other words, the end uses for the chips will not justify the massive amounts being spent on them.

If we look at companies like Google, Amazon, or Microsoft, revenue from their cloud businesses is soaring as well - but even these companies are selling shovels in a way, renting out compute to other companies that use their cloud services.

🤔 So the real question is, do the end-use cases for the chips (i.e. ChatGPT) justify the massive amount of capex being spent?

Meta ($META) for instance, came under scrutiny this quarter, crashing 13% after earnings, as investors deemed that its AI payoff is unclear. It’s AI is driving better ad targeting and a few other benefits, but is it enough to justify the $70B it’s spending this year alone?

💡 Three ‘Huge Platform Shifts’

✨ Jensen Huang didn’t shy away from this question, saying that there are 3 huge platform shifts that will ‘contribute to infrastructural wealth’ and that ‘Nvidia … enables all three transitions and does so for any form or modality of AI’. According to Huang, these 3 are

• 1) A transition from general-purpose computing to accelerated computing

• 2) A transition to generative AI

• 3) A transition to agentic and physical AI, eg robots or autonomous vehicles.

📊 According to McKinsey (the top consulting firm in the world), just generative AI (only 1 of Jensen’s 3 pillars) has the potential to unlock $2.6T to $4.4T in value.

But even McKinsey admits there is a ‘Gen AI paradox’ where of the nearly 80% of companies that have deployed Gen AI, the vast majority have seen little material impact on earnings.

🤖 Then of course you have the holy grail of AI, AGI, aka Artificial General Intelligence, which is AI that can ‘surpass humans in most economically valuable work’.

If this is possible, the economic value is technically infinite, with Sam Altman saying:

There is a lot of debate about whether AGI is theoretically possible, but Sam thinks the path is already clear, saying:

💰 The thing is, to achieve AGI, the winner will need to spend billions (or trillions) on GPUs to do so, and so the tech players are essentially in an arms race to achieve it first, and since the value is potentially infinite, their willingness to spend is as well, with Mark Zuckerburg continually repeating that the risk of ‘underinvesting’ far outweights the downside of ‘overinvesting’

🚀 So long as this race and spending continue, Nvidia’s revenues will likely continue to soar, but the question is whether this level of spending is sustainable.

🐻 The Bear / Pessimistic Case

The pessimistic argument, of course, is that all this spending is unjustified, and at some point, investors will wake up to this and start demanding on a return on the massive AI investments.

The theory is, if this happens, and big tech stops dumping buckets of cash into GPUs, this could cause the AI bubble to pop.

Tied to this is the question of whether AGI is technically possible, with some like Mustafa Suleyman, CEO of Microsoft AI, disagreeing that AGI is a solved problem:

The other concern is whether companies like OpenAI will be able to meet their massive spending commitments. OpenAI for instance, has made $1.4T in commitments, with some calling out that it “doesn’t have anywhere near the money” to meet these.

According to one of the more critical commentators:

💡 My Thoughts

❌ All of this to say that I don’t think it’s as simple as ‘Nvidia crushed earnings, therefore there’s no bubble’.

🤑 The AI-bull market is complicated, and isn’t something we should take for granted.

🙋‍♂️ For me, I sold my Nvidia position a month ago due to the rise of the circular financing deals, which I saw as increasing the risk profile. But I’m still over 50% invested in the S&P 500, which is heavily dependent on the AI hype to continue. That said, I am actively diversifying away from the AI-heavy US market with a 12% exposure in international markets (through $ZEA and $ZEM) and direct healthcare exposure ($HHL), which I see as an undervalued sector.

🎯 But as always, each of you should build your own thoughts on the market and adapt your portfolio based on your own risk tolerance and goals. I may be more risk-averse than you, may have a shorter/longer time horizon than you, or we may disagree on the likelihood of AGI, and therefore your ideal portfolio could look very different than mine.

🙏 In any case, I hope you found my breakdown and thoughts on Nvidia’s earnings interesting, and I’m excited to join the convo with you on Blossom where the posts, discussions, and memes about Nvidia are pouring in!

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