Nvidia reported another blowout quarterly result, demonstrating that the AI trend is persistent.
It delivered $26.04 billion in revenue, beating estimates of $24.65 billion. Its earnings per share came in at $6.12, surpassing the expected $5.59. Even its guidance of $28 billion in revenue for the subsequent quarter exceeded the forecast of $26.61 billion.
Naturally, the share price recalibrated to these new figures and jumped 6%, crossing the $1,000 level during after-market hours.
Nvidia’s data center segment is the main driver of its revenue growth, rising 427% from the year-ago quarter.
No companies of such size, specifically trillion-dollar market cap companies, are achieving such rapid revenue growth.
To illustrate further, I compared the absolute change in year-over-year revenue and profit growth for Nvidia with the other “Magnificent 7” companies in the latest quarter. Below is a table showing these comparisons.
Nvidia increased its revenue by $18 billion and its net profits by another $13 billion. The closest competitor is Amazon, with a $16 billion increase in revenue but just a $7 billion increase in net profits. Moreover, retailers and e-commerce companies have an advantage because they count GMV (gross merchandise volume) as their revenue, inflating their revenue figures while profit margins remain much lower.
For instance, Walmart, the company with the largest revenue in the world, only increased its revenue by $9 billion in the latest quarter compared to the same period last year. Thus, Nvidia is the company that achieved the largest revenue increase! The same holds true for its net profit increase.
This is thanks to the relentless buying from big tech companies as they engage in an AI race. Nvidia is benefiting by “selling the shovels.” Nvidia’s chief financial officer, Colette Kress, mentioned that these big tech companies, specifically those with cloud offerings like Amazon, Microsoft, and Alphabet, are contributing to almost half of Nvidia’s data center revenue.
Nvidia expects even more revenue to be generated when its new Blackwell chips are shipped three quarters later. Thus, the “shovel” business is expected to continue to prosper moving forward.
Given that the share price has hit a milestone of $1,000, Nvidia has announced a 10-for-1 stock split, which will take effect on June 10.
Although this is just a cosmetic change, stock splits can attract more attention and spur some investors to buy more shares, potentially pushing the share price up.
However, I won’t be buying NVDA because it’s too obvious, and there are even more lucrative plays tangential to this AI trend. SMCI and TSSI are two such examples. While NVDA has gained 97% year-to-date, which is very commendable, SMCI and TSSI were up 206% and 383%, respectively! Thus, it pays well if investors are willing to look at smaller caps and venture beyond the media headlines.
What do you think about TSS now? Still an attractive company to pursue?
Is there an ETF that tracks these chip companies?