Nvidia reported its result on 21 February 2023 and I would like to do a quick update on the result-review as well as my post-result thoughts.
Nvidia’s reported 4Q23 (Jan-Qtr) revenue/GMs/EPS are all above consensus. Revenue increased by 2% due to the recovery in demand for gaming GPUs, primarily driven by the strong demand for RTX40, but offset by softer Data Center sales mainly due to weaker demand in China.
Strong rebound for DC expected, supported by Generative AI hype!
Nvidia anticipates an acceleration in Data Center revenue growth in the upcoming quarters, driven by an increase in demand for AI computing, potential restocking demand from Cloud Service Provider (CSP) customers, and the launch of new products such as the H100 and Grace CPU in the second half of 2023. Nvidia also revealed that the ramp-up of the H100 has been successful, with shipments already exceeding those of the A100 in 4Q23. CSP customers have shown strong interest in the H100, which is expected to contribute significantly to Nvidia's revenue growth.
Nvidia has observed a significant increase in interest in generative AI, from both startups and major enterprises. The company predicts that the adoption of generative AI will accelerate in the coming years. Nvidia's GPU, which facilitates approximately 80% of AI computing workloads, is expected to remain a crucial component in enabling AI computing, led by its software development toolkit, comprehensive ecosystem, and strong Data Center integration such as NV Link.
Gaming demand to improve significantly from Jan 2023
Gaming revenue exceeded expectations in 4Q23, rising by 16% QoQ, primarily due to the ramp-up of the Nvidia RTX40 series, increase in ASP, and the completion of inventory de-stocking. Going forward, Nvidia plans to launch more mainstream RTX40 GPUs, including the RTX60 and RTX70, and keep channel inventory lean.
Optimistic for outlook for FY24
Looking ahead, Nvidia has guided its revenue for 1Q24 (Apr-Qtr) will grow by 7% QoQ, surpassing market consensus's forecast of 5% QoQ. Nvidia expected to experience sustained growth acceleration throughout the year, with strong product cycles in Gaming (RTX 40 series), consumer gaming recovery in China, and the much-anticipated acceleration of Data Center businesses on the ramp of its new H100 platform to support cloud/hyperscalers' strong spending on next-gen AI and accelerated compute initiatives. In Auto, demand is continuing to increase as the $11B+ automotive revenue pipeline unfolds. Despite a softer macro environment, Nvidia is set up for solid growth in CY23, driven by strong product cycles and end market diversification.
However, Nvidia is currently trading at >50x PE ratio based on its forward FY24 EPS, and the semi downcycle hasn’t exactly ended yet. Remember to DYOD!
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