Editor’s Note: If you’re at all thinking about retirement, you’ll want to see this…
As you’ll hear from Jeff today, NVIDIA is showing no signs of slowing down as artificial intelligence demand continues to accelerate… and we’re fast approaching a “second wave” of profits in the AI boom.
And if past booms are anything to go by, this second wave could deliver the biggest gains yet. It’s all in Jeff’s AI Retirement Playbook.
He put together a presentation explaining exactly where we are in the AI boom, where he believes we’re headed next, and the details of a strategy he’s designed to help you position yourself to potentially retire wealthy with AI.
You can go here to watch Jeff’s presentation. Then read on for more from Jeff on NVIDIA’s spectacular earnings results…
It’s showing no signs of slowing down…
The Washington Post headlined with, “Nvidia results show AI boom continues despite recent bubble fears.”
The Wall Street Journal came out with, “Nvidia Reports Strong Quarter Amid Investor Jitters Over AI Boom’s Staying Power.”
Another proclaimed, “Chip Maker’s Revenue Grows as Artificial Intelligence Demand Accelerates.”
NVIDIA’s fiscal second-quarter for 2025 (ending July 28, 2024) was nothing short of spectacular. For most, the results are almost hard to believe…
In most bubbles or frenzies, the rise in share price is completely detached from the actual financial performance of the company. Most bubbles are based on the future expectations of business that will hopefully come.
This was the case in the dot-com boom in 2000 and for some of the earlier bubbles in cryptocurrencies.
But that’s not the case with NVIDIA and what’s happening with artificial intelligence right now. The numbers are so concrete, the growth so incredible… and it is showing in NVIDIA’s bottom line.
Let’s have a look at a chart of NVIDIA’s quarterly revenues since its fiscal fourth quarter of 2023 (ending January 29, 2023)…
It’s hard not to be excited about a chart like that.
The most recent quarter announced yesterday came in at an incredible $30.04 billion in revenues, well above expectations and representing a 122% growth year on year compared to the fiscal second quarter of 2024 (ending July 28, 2023).
But what makes the revenue numbers that much more astonishing is the incredible gross margins of 75.1% for a semiconductor company.
As a reminder, NVIDIA owns and operates zero semiconductor fabrication plants. It’s a fabless semiconductor company. It outsources most of its production to Taiwan Semiconductor Manufacturing Co. (TSM) which has also been printing incredible results as a manufacturing company.
We can easily see the impact of NVIDIA’s incredible gross margins on its EBITDA over the same period:
Over just seven quarters, NVIDIA’s EBITDA has soared from $2.08 billion to $19.3 billion, an increase of 825%. This translated into $13.5 billion in free cash flow last quarter and a cash position of $34.8 billion.
So, why is this so important, and what does it mean?
It means that NVIDIA can invest and fund any semiconductor technology to accelerate artificial intelligence that it wants to. It has complete control over its destiny with no financial constraints.
And it has so much cash, and so much free cash flow, coming in each quarter, NVIDIA’s board announced an additional $50 billion in stock buybacks with no expiration date. It currently has about $7.5 billion left in its current share buyback program.
Buying back shares and reducing share count will result in an increased price per share (assuming no new shares are issued).
But valuation isn’t just about current results. What’s more important is the future expected results.
If there was one thing that Wall Street analysts didn’t like, it was the production modifications needed for NVIDIA’s next-generation Blackwell GPUs.
NVIDIA is known for pushing the edge of semiconductor design and manufacturing processes for its GPUs.
Naturally, the Blackwell product uses a more advanced manufacturing process compared to its current H100 GPUs which were manufactured using a 5-nanometer process technology.
The “nanometer” is the distance between transistors on the semiconductors. Blackwell is designed on a 4-nanometer process technology which is an enhancement of TSMC’s 5-nanometer technology.
As a result, the Blackwell GPU is up to four times faster than the H100 on a popular machine learning benchmark.
The Blackwell GPU has 208 billion transistors compared to the H100’s 80 billion transistors. And what is lost on most is that Blackwell is about twice the size of the H100’s. Physically bigger semiconductors result in fewer semiconductors per wafer.
That means manufacturing defects have a more dramatic impact on manufacturing yield.
That’s why NVIDIA had to take the time and adjust the process to improve its manufacturing yield for Blackwell. When working on the bleeding edge of manufacturing, there are always adjustments.
But these short delays didn’t impact NVIDIA’s revenues.
H100s continue to fly off the shelves, and the backlog for Blackwell GPUs is massive. The company expects to ship “several billion dollars” in Blackwell GPUs in the fourth quarter.
NVIDIA (NVDA), Advanced Micro Devices (AMD), and others are in a unique position right now.
Their revenues are basically restricted only by the number of semiconductors they can have manufactured by TSMC. Their order books span many quarters, so they have excellent visibility on their growth.
NVIDIA will generate about $124 billion in revenue this fiscal year (ending January 31, 2025) and by fiscal year 2027 (ending January 31, 2027) it will exceed $200 billion in revenue. Free cash flow will jump from $61 billion to more than $100 billion in that same time frame.
These are real numbers… And they are being driven by the continued investment in hyperscale data centers being built to develop artificial general intelligence.
To that point, OpenAI is currently looking to raise several more billion led by venture capital firm Thrive Capital. Microsoft is expected to put even more into the AI leader as well, after having already invested $13 billion.
Shares of OpenAI are privately trading around a $103 billion valuation right now, so we can expect that Thrive’s round will result in a valuation above that.
How is that possible?
OpenAI will generate more than $3 billion in revenue this year, and the growth has been exponential. Its valuation will be largely determined by 2025 revenue forecasts and expected growth.
If it can generate $3 billion, $5 billion, or $10 billion in revenue off of its current AI technology – which we discussed in yesterday’s Bleeding Edge – just imagine what kind of revenue will be generated with an artificial general intelligence (AGI).
Again, these are real numbers driven by hundreds of billions pouring into building out AI infrastructure.
The growth continues and the technology accelerates. And increasing the installed capacity of GPUs at massive data centers will only increase the number of breakthroughs that we’re seeing in AI.
The reality is that NVIDIA is just the tip of the iceberg. It’s getting all the attention. So much so that earnings watch parties are being held every quarter.
But it won’t be long before the reason for these celebratory gatherings changes from earnings announcements to celebrating the technology that will unburden us from time-consuming, undesirable, and sometimes physically taxing tasks giving us more free time to enjoy life and focus on the things that we’re most passionate about.
Here’s to our future.
Cheers.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
