Nvidia Stock Analysis

Latest ER highlights; Risks vs Catalysts;

source: Nvidia

Latest Earnings Highlights

• Total revenue of $8.3 billion was a record, up 8% sequentially and up 46% year-on-year.
• Record quarterly revenue for Data Center and Gaming
• Data Center has become the largest platform, even as Gaming achieved a record quarter

Future Outlook

• Revenue is expected to be $8.10 billion, plus or minus 2%. This includes an estimated reduction of approximately $500 million relating to Russia and the COVID lockdowns in China.

Detailed Growth

• Data Center revenue of $3.8 billion grew 83% year-on-year. Revenue from hyperscale and cloud computing customers more than doubled year-on-year.
• Gaming revenue of $3.6 billion rose 31% year-on-year.
• Professional Visualization revenue was $622 million, up 67% from a year ago and down 3% from the previous quarter.
• Automotive and Robotics revenue was $138 million, which declined 10% from the year-ago quarter.

Risks

• Slowing Gaming market would negatively affect the revenue.
• Slowing Crypto market would reduce the demand for Nvidia GPUs.
• Automotive / self-driving related revenue is slow and does not seem to grow.
• Seeing softness in parts of Europe related to the war in the Ukraine and parts of China due to the COVID lockdowns

Catalysts

• Data Center market will continue to have strong momentum moving forward.
• The creator economy increases the usage of GeForce Now service by creators and broadcasters.
• Arm acquisition would not be a distraction for Nvidia anymore.
• Metaverse / AR / VR market trend could stimulate Professional Visualization to continue to grow.
• Automotive / self-driving business could grow exponentially once Nvidia proves its value/capability to auto markers.

Conclusion

Neutral in the short term and Bullish in the long term

In short term, Nvidia has several headwinds under the current macro environment (i.e. slowing Gaming and Crypto markets, Geopolitical and FX risks). However, in the long term, Nvidia is well positioned for the data center and AI computing trends.

Possible better stocks could be:

1. Tesla (TSLA), because current Tesla’s business grows at an 80%+ rate without seeing any significant headwinds. It is also able to manufacture its own chip and well positioned for AI technology.