Nvidia (NVDA) is another multilayered business with revenues coming from east and west and basically everywhere and really at a time when the gaming market is the largest ever.
Let’s make this clear: Nvidia isn’t a gaming stock, but its best business is centered around the secular gaming trend.
They have this massive installed base of GeForce users (Nvidia branded graphics processing units).
They have reinvented computer graphics as well as resetting the install base — created a pipeline of profits that take advantage of the boom in gaming which many as you know went gangbusters because of the shelter-at-home conditions.
There has been substantial development on the gaming front — at a time when gaming market is expanding fast, and peeling back the layers it sports — eSports — it's infused into art.
It is infused into social.
And so, gaming has such a large cultural footprint now, even to the point that it’s the largest form of entertainment in the world.
The emphasis of this experience is going to resonate for the long term and not only that, the phenomenon called crypto — Nvidia’s Crypto graphic cards named CMP will funnel GeForce supply to gamers.
The Nvidia CMP 30HX is a dedicated crypto mining card. The CMP 30HX is essentially a mid-range graphics card powered by Nvidia’s TU116 processor.
There is strong demand for this product, and I expect to see elevated sales for quite some time because of the dynamics of crypto and the avalanche of capital gravitating towards it not only institutional but from retail too.
And hopefully, in the combination of gaming, crypto, and data, Nvidia is primed to experience strong growth in core businesses through the year.
The data backs up Nvidia’s ambition with Q1 exceptionally strong with revenue of $5.66 billion and year-on-year growth accelerating to 84%.
They set a record in total revenue in Gaming, Data Center, and Professional Visualization, driven by their best product lineups and structural tailwinds across our businesses.
Starting with Gaming, revenue of $2.8 billion was up 11% sequentially and up 106% from a year earlier.
Channel inventories are still leading and Nvidia expects to remain supply-constrained into the second half of the year.
Now Laptops continue to drive strong growth this quarter with all major PC original equipment manufacturers (OEM) launching GeForce RTX 30 Series laptops based on the 3080, 3070, and 3060, as part of their spring refresh.
This is the largest ever wave of GeForce gaming laptops, over 140 in total as OEMs address the rising demand for gamers, creators, and students for NVIDIA's powered laptops.
They believe gaming also benefited from crypto mining demand, and Nvidia is separately addressing mining demand with cryptocurrency mining processors or CMPs.
The crypto CMP revenue was $155 million in Q1, reported as part of the OEM and other category. And our Q2 outlook assumes CMP sales of $400 million.
Data Center continues to be a growth driver with revenue topping $2 billion for the first time, growing 8% sequentially and up 79% from the year-ago quarter, which did not include acquisition Mellanox.
And then lastly, supercomputing; supercomputing centers all over the world are building out and Nvidia is in a great position to fuse together time simulation-based as well as data-driven-based approaches, which are called artificial intelligence.
Across the board, data center is gaining momentum and is the largest segment of computing and will continue to train deep neural networks with rising computational intensity led by two of the fastest growing areas of AI; natural language understanding.
Demand is booming across Nvidia’s markets and readers can expect increase in CMP, but they still expect the lion share of growth to come from Data Center and Gaming.
In Data Center business, their product lineup couldn't be better and they have a strong overall portfolio both for training and inferencing and they are experiencing strong demand across hyperscales and vertical industries.
The foundation has been laid to be a three-chip data center scale computing company with GPUs, DPUs and CPUs.
Fortunately for Nvidia, AI is the most powerful technology force of our time.
Nvidia partners with cloud and consumer Internet companies to scale out and commercialize AI-powered services.
They are democratizing AI for every enterprise and every industry.
With pre-trained models for conversational AI, language understanding, recommender systems, and broad partnerships across the IT industry, Nvidia is removing the barriers for every enterprise to access state-of-the-art AI.
From gaming, metaverses, cloud computing, AI, robotics, self-driving cars, genomics, computational biology, Nvidia is engaging in important work and innovating in the fastest-growing markets today.
Now to look at our outlook for Q2, revenue is expected to be $6.3 billion, and remember that the prior year when Q2 revenue was $3.87 billion.
This company is mesmerizing, growing from $11 billion in annual revenue to $16.68 billion in just one year says it all.
Growing revenue in the mid-80% means it will easily surpass the $9 billion in the first two quarters of the year paving the way for an almost $20 billion per year business.
Sure it’s not Apple or Microsoft but for what it does, they are best in show in an industry that is going through a massive supply headwinds.
The quarterly performance only reinforces the thesis that chip companies are a great place to allocate funds to and the support is there for a buy the dip investor attitude because of growing EPS which promotes share buy backs and capital returns to shareholders.
It’s hard to believe that investors could put their money elsewhere because tech still secures the vast majority of earnings in the business world and that train isn’t slowing down and the bullet train is clearly the chip sector in 2021.
