Nvidia Continues To Lead The Way But Competition Is Intensifying

On Wednesday, Nvidia Corporation NVDA issued a better-than-expected fiscal second quarter report. However, its shares fell after the report, but still remain about 150% up for the year as Nvidia continues to serve big companies like Microsoft MSFT, Amazon.com Inc AMZN Alphabet GOOGGOOGL, Meta Platforms META and Tesla Inc TSLA. 

Second Quarter Highlights

For the quarter ended in July, Nvidia reported its revenue surged 122% on a YoY basis as it topped $30 billion. After three straight quarters of YoY growth surpassing 200%, revenue of $30.04 billion still surpassed LSEG’s estimate of $28.7 billion. Net income more than doubled to $16.6 billion, or 67 cents per share while adjusted earnings per share of 68 cents surpassed LSEG’s estimate of 64 cents. 

The gross margin did slip to 75.1% from the first quarter’s 78.4%, but it is up compared to last year’s comparable quarter when it amounted to 70.1%.

Data center revenue surged 154% YoY to a record $26.3 billion. Before that business took center stage, Nvidia’s primary focus was gaming that still brought in $2.9 billion as revenue grew 16% YoY. Its professional visualization business reported revenue grew 20% YoY to $454 million while the automotive and robotics brought in revenue of $346 million.

Third Quarter Guidance

For the current quarter, Nvidia guided for revenue of $32.5 billion, also surpassing StreetAccount’s estimate of $31.7 billion as it expects YoY growth of 80% on the back of strong Hopper demand.

Delay of Blackwell chip rollout.

The full-scale shipment of next-generation Blackwell AI chip is expected in the fourth quarter, bringing in several billion dollars to the revenue table, but analysts were expecting it in the current quarter. Nvidia has made a change to the GPU mask to improve production yield and is now only sending samples to partners and customers. Its H100 and H200, are being used to fuel a majority of generative AI applications, such as Microsoft-backed OpenAI’s ChatGPT, but CEO Jensen Huang noted that the anticipation for Blackwell is incredible.

Competition is intensifying, but so are Nvidia’s efforts.

Second to Apple Inc AAPL on the list of the world’s most valuable companies, Nvidia continues to move fast, like AI and the narrative surrounding it. Its competitors are speeding up their AI efforts with Microsoft, Amazon, Google and Meta being on track to spend $185 billion on AI before 2024 comes to a close, according to a JPMorgan analysis. Amazon alone focused on advancing its chip development to lower its reliance on Nvidia. During its last earnings call, Amazon also announced the updated versions of its Trainium and Inferentia chips. But even Amazon is still buying chips from Nvidia whose chips still remain a must for most complex AI tasks. Nvidia’s biggest competitor, Advanced Micro Devices AMD also surpassed earnings estimates with its latest quarter that ended on July 30th. While AMD has had a challenging few years, it is taking active steps to ensure a key spot in the AI field. With key acquisitions to strengthen its AI prospects, AMD is aiming to become a complete provider of AI solutions. Unfortunately for AMD and others, Nvidia is doing everything in its power to make it harder for them to catch up.

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