“The godfather of AI delivers again,” gushed Wedbush’s Dan Ives after Nvidia posted another blowout quarter. The tone was breathless, a little hyperbolic – but not without basis.
Revenues rose 69 per cent to $26 billion (€22.9 billion), gross margins (71 per cent) remain astonishingly high and sales of its new Blackwell chips appear to be ramping faster than expected.
US export curbs have hurt. Chief executive Jensen Huang confirmed Nvidia was taking a multibillion-dollar write-off on unsellable inventory, and warned the $50 billion Chinese market is now “effectively closed” to US chip makers.
However, talk of China curbs obscures the “most important takeaway”, says high-profile tech analyst Gene Munster: “Business is booming, and we are still early in the AI infrastructure buildout.”
Stripping out the China export curbs, April revenue would have been up 79 per cent year on year. Munster expects business outside China to grow 76 per cent in July, up from previous forecasts of 60 per cent. His point: forget the China curbs, business is “off-the-charts good”.
Sceptics might question the durability of Nvidia’s dominance and of its extraordinary margins. Growth at this pace can’t last forever. Big customers such as Microsoft, Google, Amazon and Meta must invest heavily in their own AI chips, reducing their dependence on Nvidia over time.
Still, Nvidia’s lead looks unassailable for now. Although once again the world’s most valuable company, the stock is not obviously overvalued. Yes, it has surged more than 60 per cent since April’s bottom, yet over the past year it has gone largely sideways.
At 31 times forward earnings, it’s not cheap – but for the only game in town, it may not be pricey either.
