In a recent appearance on Schwab Network's the Futures with Caroline Woods, Chris Wang provided expert insights and analysis on upcoming earnings report from Nvidia (NVDA).



NVDA –

  • Trading in line with their 3 year medium forward PE at 44x but well below peak of 80x; using 2027 earnings at 44x multiple, you get a $200 stock
  • Demand from its 4 largest customers (Google, Meta, Microsoft, Amazon) remains robust (Google 35%; Azure 34%, AWS +19% – supply, not demand, remains a constraining factor; Meta said 2025 capex will be up significantly)
  • Next gen Blackwell chip is sold out for the next 12 months as demand for AI models and applications continues unabated

Emergence of Generative AI provides an opportunity for its customers to grow revenues and/or improve productivity. This could mean faster top line growth and margin expansion which would be a goldilocks opportunity for corporate America.

NVDA is working on the 3 biggest barriers limiting AI demand today: energy consumption, latency and precision accuracy. Blackwell is designed for unprecedented performance with better energy efficiency.

Similar to the 1999-2000 when Juniper and Cisco were the darlings of the fiber buildout for internet boom; AI is still in the early stages of the build. Nvidia will ultimately experience a cyclical correction when customers enter a phase of compute capacity optimization, but the likelihood of this happening in the next 12 months is limited; particularly given the recent increases in AI use cases.

The last 5 quarters has seen triple digit revenue growth; this is the first quarter where the street is below that mark at 82% sales growth and 84% earnings growth; next year expectations for 40% growth on top and bottom line.