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Nvidia: Better To Enter Now Than Never

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  • Q2 2023 Performance: Normalized EPS: $2.70, GAAP EPS: $2.48, Revenue: $13.51 billion
  • Global Reach: Strong revenue growth in the US (204% increase in Q2 2023), with consistent growth in Taiwan and China (including Hong Kong), showcasing NVIDIA’s global reach and adaptability.
  • Growth Driver: Data Center segment is the primary revenue driver, with a 171% increase in Q2 2023 and a 93% increase in H1 2023.

NVIDIA Corporation (NASDAQ: NVDA) has exhibited exceptional financial performance and strategic advancements, positioning itself as a leader in the tech industry. The company’s latest earnings report showed outstanding results, surpassing market expectations in terms of earnings per share (EPS) and revenue. With a solid foundation, NVIDIA is poised for continued growth and success.

Exceptional Q2 2023 Performance

In the second quarter of 2023, NVIDIA reported a normalized EPS of $2.70, exceeding the consensus estimate by an impressive $0.63, while the GAAP EPS stood at $2.48, $0.75 higher than expected. The company’s revenue for the quarter reached $13.51 billion, surpassing expectations by a substantial $2.42 billion. This exceptional financial performance highlights NVIDIA’s ability to exceed market expectations, making it an attractive investment opportunity.

Metric Q2 FY24 Q1 FY24 Q2 FY23 Q/Q Y/Y
Revenue $13,507 $7,192 $6,704 Up 88% Up 101%
Gross Margin 70.10% 64.60% 43.50% Up 5.5 pts Up 26.6 pts
Operating Expenses $2,662 $2,508 $2,416 Up 6% Up 10%
Operating Income $6,800 $2,140 $499 Up 218% Up 1,263%
Net Income $6,188 $2,043 $656 Up 203% Up 843%
Diluted Earnings Per Share $2.48 $0.82 $0.26 Up 202% Up 854%

Upcoming Quarter Outlook

Looking ahead to the upcoming quarter, the consensus estimate for normalized EPS is $3.35, with projected GAAP EPS at $2.97. Revenue is expected to reach an average estimate of $16.07 billion. NVIDIA’s strong financial performance and the market’s positive outlook demonstrate the company’s potential for continued growth.

Strategic Advancements and Data Center Dominance

NVIDIA’s strategic announcements and business highlights further support its growth trajectory. The company has made significant advancements across its various segments, including data center innovation, gaming advancements, professional visualization initiatives, and automotive milestones. NVIDIA’s focus on innovation and emerging technologies positions it as a market leader in these sectors. The Data Center segment remains NVIDIA’s primary revenue driver, with a 171% increase in Q2 2023 and a significant 93% increase in H1 2023. The company’s leadership in AI, HPC, and graphics, coupled with increasing demand for AI adoption and data-center scale innovation, contribute to its success in this segment.

Revenue Segment Three Months Ended July 30, 2023 Three Months Ended July 31, 2022 % Change (Q2 2023 vs. Q2 2022) Six Months Ended July 30, 2023 Six Months Ended July 31, 2022 % Change (H1 2023 vs. H1 2022)
Data Center $10,323 $3,806 171% $14,607 $7,556 93%
Gaming $2,486 $2,042 22% $4,726 $5,662 -16%
Professional Visualization $379 $496 -24% $674 $1,118 -40%
Automotive $253 $220 15% $549 $358 53%
OEM and Other $66 $140 -53% $143 $298 -52%
Total revenue $13,507 $6,704 101% $20,699 $14,992 38%

Gaming Sector Recovery and Challenges

In the gaming sector, NVIDIA’s GeForce platform boasts a strong position in PC gaming, serving 200 million gamers globally. With a 22% growth in Q2 2023, the gaming segment is showing signs of recovery, and the introduction of the NVIDIA Avatar Cloud Engine (ACE) for Games aims to transform gaming experiences further. NVIDIA’s Professional Visualization segment, which holds a 90% market share in workstation graphics, experienced a decline of 24% in Q2 2023. To counter this decline, NVIDIA introduced three new desktop workstation RTX GPUs and a major release of the NVIDIA Omniverse platform, enhancing AI, graphics, and real-time rendering capabilities.

 Automotive Advancements

The Automotive segment witnessed a 15% increase in Q2 2023, highlighting NVIDIA’s dominant position in autonomous driving. Partnerships with companies like MediaTek demonstrate NVIDIA’s commitment to advancing automotive AI and graphics.

Global Reach and Market Adaptability

Geographically, NVIDIA’s US revenue surged by 204% in Q2 2023, affirming strong domestic demand. Taiwan and China (including Hong Kong) also showed consistent growth, emphasizing NVIDIA’s global reach and market adaptability.

Region Three Months Ended July 30, 2023 Three Months Ended July 31, 2022  % Change (Q2 2023 vs. Q2 2022)  Six Months Ended July 30, 2023  Six Months Ended July 31, 2022  % Change (H1 2023 vs. H1 2022)
United States  $6,043  $1,988 204%  $8,428  $3,921 115%
Taiwan  $2,839  $1,204 136%  $4,635  $3,981 16%
China (including Hong Kong)  $2,740  $1,602 71%  $4,330  $3,683 18%
Other countries  $1,885  $1,910 -1%  $3,306  $3,407 -3%
Total revenue  $13,507  $6,704 101%  $20,699  $14,992 38%

 Conclusion

Despite certain challenges and uncertainties, such as supply chain complexity, product transitions, and global trade dynamics, NVIDIA remains well-positioned for future success. The company’s ability to innovate, strategic partnerships, and market expansion opportunities, coupled with its ability to exceed market expectations, make it a highly attractive investment option. As NVIDIA continues to drive innovation and capitalize on its market advantages, it is well- positioned for long-term growth and success in the tech industry. The company’s strong financials, coupled with its focus on emerging technologies and market expansion opportunities, warrant us to continue to buy with a long-term target in the range of $620-630.

Disclosure: We don’t hold any position in the stock.

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