The Six Five team discusses NVIDIA Earnings Predictions
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Transcript:
Daniel Newman: But Nvidia, Pat. I mean we’ve been through the earnings wave. Nvidia has this interesting benefit of coming at the tail end of the tech earnings. I tend to agree, everybody’s waiting to see what’s happened. We’ve had this really crazy ebb and flow. The economy was going to crash. The Japanese … The yen carry trade was unwinding. We were going to go into a massive recession. The world was ending.
Then two days later, everyone forgot about it. Now we’re back to how many GPUs can somebody sell this quarter? Oh, by the way, there were delays and then there’s not delays, and then there’s a demand issue and then there’s not a demand issue, and then there’s … There’s just so much. The regulatory environment’s creeping. Pat, here’s my take. I did a breakdown. I tweeted this out. I hope-
Patrick Moorhead: It was so good. It was so good. I think you and I spent 25 minutes on the flight of me asking you questions. I’m like, “Where did this come from?” It was so good. Let’s go hit it.
Daniel Newman: Yeah, let’s start with where it came from. I mean, look, I saw this note that came out from Unusual Whales. It’s a great account on Twitter, by the way, one that I like to follow. It came out talking about the implied volatility, which basically means what is going to happen upon its earnings announcement is the largest it’s been in 10 quarters for Nvidia. So Nvidia’s always been a bit of a firebrand in that way, where it’s earnings, even back in its gaming days, it was just volatile. If you look at years … Like I looked at like 20 years. It’s not a company that went up and down 10%. It was like a company that was up 200%, then down 70%, then up 300%. There was just crazy numbers over the years. So the movement on this company has been pretty crazy.
AI has totally changed it now. It went from a gaming-dominant company to … Data center’s like 10 times the size, if not more, of its gaming business now, and it happened really quickly. So there’s this huge volatility, which basically means there’s this bearish and bullish thought that it’s either going to blow it out and it’s going to go parabolic up or it’s going to have a surprise. By the way, it may still blow it out and have a surprise just in something it says about demand or something it’s going to say about issues in manufacturing supply. We’ve heard rumblings, but it seems like they’ve got most of their stuff in order. They’ve got this annual cadence right now.
But here’s the long and short, Pat. The market’s waiting and it’s on pins and needles because this is the is AI moving forward trade? All the BS from the bubble bears that I like to talk about about AI is the digestion/ingestion period of when AI starts to find its way into applications and into industry, no one cares right now because these five companies keep spending hundreds of billions on CapEx that will fuel the near term. So the next two, three, four quarters, I think, are really bullish for Nvidia.
First off, they can’t meet supply. One of the rumors that came out this week across the internet was that basically OpenAI, and we’ll actually back this further with other rumors we heard this week, is struggling to get enough GPU demand right now, and that beyond, obviously, Microsoft and Google and some of the biggest buyers on the CapEx side, but that Meta and xAI, Tesla, and others have basically caused OpenAI some indigestion as it relates to getting enough GPU. The second, Pat, is you and I can read the tea leaves. TSMC’s numbers pretty much gave us the all clear. You’ve got more demand for three-nanometer, more demand for costs than they can make, and it was pretty well-understood that most of that demand is going to Nvidia. And so, they’re taking most of that demand, which means they’re basically going to pump out every single GPU they can make in this period of time.
Third is that, Pat, you and I, we’ve talked to our channel partners, channel checks across the board. All of our partners are basically … They’re all lusting for more supply. They’re all trying to get their hands … Basically saying they can sell everything they can get their hands on. Now there’s still a lot of consternation in the channels about their ability to make money, but this is what the customers want. So the pull through has been undeniably powerful. The annual upgrade cycle, Pat, has gone to a year. We’re seeing AMD doing the same thing. The one-year cycle is real, and every company is going to be forced into doing this to some extent because they won’t be able to keep up. So if Google goes all in on Grace Blackwell and on the B series, Amazon can’t be like, “No, we’re not going to offer the best chip.” They’re going to have to … So it’s going to create this pull.
Then, finally, Pat, I think I shared, but we’re starting to see end customer use cases come, which is even more of a bullish trigger because Walmart’s really strong earnings. Now, again, retail, we’re not going to dig into too many broad, macro topics, but retail, Pat, outperformed this week, but I think it outperformed because pricing and inflation numbers are high, which kept revenue numbers high. But these companies are coming out talking about AI. So Walmart talked about massive efficiency gains with AI. Of course, if there’s massive efficiency gains with AI and companies like Walmart are investing big, you can bet those big investments are going through Nvidia.
Patrick Moorhead: Great breakdown, Dan. Super impressive. Like I said, it was fun actually talking about your one tweet for 25 minutes.
Daniel Newman: I don’t do that often, but thank you.
Patrick Moorhead: No, it was good stuff. Listen, you did comprehensive. I’m going to do simple. There is nothing that’s going to be stopping this train short term, albeit a complete and total economic collapse. The reason is FOMO. As an IaaS provider, you cannot even blink on the amount of CapEx you’re going to be spending in the next 12 and maybe 18 months. The only thing that’s going to keep that happening is going to be investor pressure. I don’t think they’ll get any investor pressure unless they have super declines in their core business, like Google Ads, like AWS, Microsoft, and, therefore, they’re going to keep cranking it out because the stakes are high. I mean we could look at 10, 20, 30 years of dominance if one of these companies pulls away from the pack.
And your Walmart example was really good as a downstream. Yes, over time, you have to have the ServiceNows, the SAPs, the app stacks at Microsoft, the app stacks at Google, even Google finding ways to better target their advertisers via generative AI. Until then, it’s the internet build out, baby. Nvidia’s the new Cisco. What I don’t see is pet food companies and hardware tool companies that have no business model selling stuff. A lot of the downside beneficiaries are very large companies.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
