To The Moon

Just now, $NVIDIA Corp(NVDA)$ , the king of AI, released its first quarter earnings for fiscal year 2025, which exceeded expectations and shocked Wall Street again!

Specifically, Nvidia revenue was $26 billion in the first quarter, an increase of 262%, far exceeding analyst expectations of $24.7 billion:

Segments

Data Center revenue was $22.56 billion, a year-on-year surge of 426.7%, far exceeding analyst expectations of $21.1 billion;

Gaming revenue was $2.65 billion, up 18.2% year-on-year, slightly exceeding analyst expectations of $2.62 billion;

Automotive revenue exceeded $300 million for the first time, reaching $330 million, an increase of 11.1%;

Professional Visualization revenue clocked in at $430 million, up 44.7% year-on-year.

The explosive growth in Data Center is driven by four main factors:

• First, cloud computing giants are ramping up datacenter construction, and the demand for AI large model training and inference continues to grow.

• Second, enterprises are increasing GPU purchases. For instance, $Tesla Motors(TSLA)$ procured 35,000 H100 GPUs to power its breakthrough in FSD 12.

• Third, internet companies are rolling out various large model products. $Meta Platforms, Inc.(META)$ released Llama 3, using 24,000 H100 GPUs. As Meta's user base grows, the demand for computation power for its large models is expected to surge.

• Fourth, countries around the world are investing in Sovereign AI. Just like French President Macron's speech this Tuesday at the Elysee Palace, urging the EU to increase tech investments and not rely on the US and China.

EV chip

The robust demand has Nvidia's GPUs in short supply. The company stated that demand for H200 and Blackwell far exceeds supply, and it's expected to remain that way next year.

With Data Center revenue dwarfing other businesses, investors are undeterred, even if they don't care about other segments.

Now, let's touch on the other segments briefly. Gaming revenue grew mainly due to an increase in PC shipments. Professional Visualization is back on track after clearing out inventory. And autonomous driving is growing steadily, with car manufacturers adopting Nvidia's Orin chips on a large scale.

As the chips are primarily used in electric vehicles, Chinese manufacturers are leading the way. Recent launches like $XIAOMI-W(01810)$ $Xiaomi Corp.(XIACY)$ SU7 and $Li Auto(LI)$ $LI AUTO-W(02015)$ L6 almost all use Nvidia's Orin chips. And next year, the more powerful DRIVE Thor is expected to hit the market, with $BYD Co., Ltd.(BYDDF)$ $BYD COMPANY(01211)$ $XPeng Inc.(XPEV)$ $XPENG-W(09868)$ GAC AION already announcing their adoption.

While autonomous driving chips' revenue is still small, they have the potential to become Nvidia's next growth driver after Data Center. As mentioned in the earnings call, cars will become the largest enterprise vertical market within Data Center, bringing in billions of dollars in revenue opportunities for both local and cloud consumption!

Profit

With soaring revenue and favorable component dynamics, Nvidia's gross margin in the first quarter reached 78.4%, significantly exceeding analysts' estimates of 77%.

However, the component advantage won't last forever. Nvidia expects its gross margin to be around 74.8% in the second quarter and around 70% for fiscal 2025, still significantly higher than before the AI boom.

It's become a routine for Nvidia to exceed expectations. After releasing its first-quarter earnings, Nvidia's stock price surged 6%, breaking the $1,000 mark.

Investors envy Nvidia's status as the king of AI, but they're also worried about a valuation bubble after the explosive growth.

P/S

Looking at Nvidia's price-to-sales ratio, it's currently at 29.4 times, nearing its historical high. But Nvidia's revenue is still growing rapidly. For instance, the company expects revenue of around $28 billion in the second quarter.

Considering the shortage of Nvidia's GPUs and its significant lead in performance over competitors, Nvidia's revenue will continue to benefit from AI demand.

Currently, analysts expect Nvidia's revenue to reach $113.3 billion in fiscal 2025. Based on that, the dynamic price-to-sales ratio is only 20.7 times, significantly lower than the 33 times during the semiconductor bull market in 2021.

As Nvidia's CEO Jensen Huang said, AI is the fourth industrial revolution, and both enterprises and governments are investing heavily. With Nvidia's near-monopoly position, this bull market will surely surpass historical records.

Nvidia is not a bubble!