To The Moon

Summary - Nvidia Q1 2024 Top & Bottom Line

$NVIDIA Corp(NVDA)$ has announced its Q1 2024 quarter earnings after market closed on Wed, 24 May 2023.

To me it was a good set of results at first glance.

Post market reaction has been euphoric!

The world’s most valuable semiconductor company is poised to open on Thu, 25 May with a +25% surge in its stock price.

Fantastic, especially for shareholders!

Would I want to join in the “fun & excitement”?

No thank you.

My Personal Reasons:

(1) Try not to “chase” after a stock; regardless “how valuable and full of future potential” at the moment.

(2) Referring to its latest quarterly earnings (see above), Nvidia’s top line has missed its mark (YoY).

Although it is marginal, nonetheless still a “miss”.

More importantly, it was Nvidia’s CEO Mr Jensen Huang recent conversation with UK’s Financial Times, 2 days(?) before China announced its ban on $Micron Technology(MU)$ chips that shed valuable light on this fabless company.

What Did He Say That Was So Insightful?

(3) Biden administration’s $52 Billion funding to encourage construction of semiconductor manufacturing facilities in the US will become the “most expensive” white elephant when all these “state of the art” foundry is unable to find sufficiently “big” market for the chips produced (due to China-ban).

Would that lead to:

• Closure of newly built foundry, due to no or low demand.

• High production costs due to inability to benefit from economies of scale.

• Low demand for “expensive” chip produced {due to above reason}. Japan & Korea may become the beneficiary as a result - it is a price sensitive & competitive cyclical industry afterall..

(4) Inability to sell advanced chips to China is hurting US-based semiconductor companies & industry as a whole.

(5) Chinese companies have been attempting to build their own chips to rival Nvidia’s market-leading processors for (a) Gaming, (b) Graphics and (c) Artificial intelligence.

(6) In the midst of tightening a ban on semiconductor chips to China, US does not have a backup & contingency plan. This is a dangerous path to trek.

(7) China is not short of technical talents unlike US whose smaller talent pool is focused only cutting-edge technology with ownership of intellectual property (IP) as its leverage.

Eventually when China is able to crack the “mystery” behind the lithographic machine needed to be built to produce the most advanced 3nm or even 2nm chip, would that signal the start of demise of US semiconductor industry?

(8) China made up roughly 33% of US tech industry’s market. It is “impossible” to replace as both (a) a source of components and (b) an end market for its products.

(9) China + Hong Kong, accounted for > 20% of Nvidia’s sales, based on FY Jan 2023.

I am “heartened” to read Mr Huang’s intelligent & coherent argument on a “taboo” subject no other semiconductor CEOs wanted to bring to the US government’s urgent attention.

If there are any “officials with foresight” left in the US government, now is the time to speak up before its too late.

Nobody would want to hear the phrase “I Told You So!”.

• Do you think there is/are more upside/s to Nvidia as a company?

• Do you think you will jump in and buy Nvidia stock now?

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