Dear Reader,
I got Nvidia wrong.
The chipmaker released its second-quarter results yesterday. And in my last issue of The Bleeding Edge, I told you that I thought Nvidia would report $11.5 billion in revenue… For context, my estimate was $500 million over Wall Street’s.
Nvidia actually made $13.5 billion. That’s 17% higher than what I was expecting.
Here are some of the highlights from the earnings call; all figures are year-over-year change:
Revenue: Up 101%
Gross margin: Up 26.6 pts
Operating income: Up 1,263%
Net income: Up 843%
Earnings per share: Up 854%
Expectations were high coming into Nvidia’s earnings announcement… but it still managed to surprise everyone.
What surprised me the most wasn’t the demand. I know AI is an undeniable trend and that every major software maker is scrambling to get as many of Nvidia’s H100 GPUs to build and train their AI models.
No, what was shocking was how fast suppliers were able to get Nvidia the parts it needed for these chips.
Nvidia’s H100 is a complex machine. It weighs 70 pounds, has 35,000 parts, and has nearly 1 trillion transistors.
Nvidia relies on a web of suppliers and testing companies to source parts and make sure each unit is running at peak performance.
There was some concern that if even one of these suppliers fell short, the entire supply chain could be disrupted. However, these suppliers ramped up their operations to meet Nvidia’s surging demand.
Nvidia has a rare opportunity today. Its H100 chips are the best in class. If you’re a tech executive trying to build the next great AI model, Nvidia’s chips are the go-to.
But once again, Nvidia is not my favorite way to gain exposure to the AI trend.
Nvidia dominated earnings. But with a market capitalization north of $1 trillion, it takes a lot to move the stock. As a company, Nvidia has a bright future. But as an investment, its days of explosive growth potential are over…
However, there are plenty of opportunities within the broader AI trend to profit from.
And if Nvidia’s rapid sales growth is any indication, the AI opportunity is going to be even bigger than the boldest estimates out today.
When we think back to the adoption of the internet, we see a similar pattern play out. First, it was the hardware providers that benefited. We can think of companies like Cisco with its networking hardware.
Then, there were the software developers. I would put a company like Microsoft in this bucket. Microsoft’s Windows operating system made personal computers accessible and user-friendly at precisely the time when the rise of the internet made PCs a “must-have” device.
As for “everywhere”? Can we think of any industry that has not been changed in some way by the adoption of the internet? The businesses that resisted the new technology simply faded away. The companies that adopted it became more efficient, more productive, and more profitable.
It will be the same pattern with AI. Just remember: Hardware, software, everywhere.
Nvidia is the hardware company powering AI today. But it has a vast network of suppliers that also offer triple-digit upside.
As for software, Microsoft is once again a market leader… along with others like Meta and Alphabet. But there are also smaller companies like Adobe that are making AI applications for enterprise and personal use. Many others have announced AI services and products that they’ll be rolling out over the next year.
AI isn’t everywhere yet. But we’re seeing strong interest. A survey by Accenture showed that 73% of companies polled are prioritizing AI investment over other technologies.
JPMorgan Chase is using AI to cut down on fraud. Gucci is using AI to improve its customer service. Johnson & Johnson is using AI to help research compounds for new drug discoveries. These are just the earliest adopters of AI. By 2030, AI will be as commonly used as the internet is today.
Nvidia’s production ramp-up means that more GPUs are making it into the hands of developers and software companies.
That’s pulling the entire timeline of AI adoption forward. That means as investors we can’t afford to sit on the sidelines and wait. If we don’t invest in AI today, we’re going to miss one of the greatest technology and investment opportunities of our lifetime.
I’ve recommended four AI companies across my Near Future Report and Exponential Tech Investor advisories over the past month. My team is hard at work finalizing even more recommendations. If you’re subscribed to either of these advisories, we’ll send you an alert as soon as they’re ready.
If you aren’t a paid subscriber, I’ve already unlocked three must-own AI stocks. You can read about them here.
Some readers are probably wondering why I spend so much time focusing on AI here in The Bleeding Edge. If I seem fixated on AI, it’s because I am.
The blowout earnings from Nvidia should tell us why… There’s no better opportunity to grow your wealth in the stock market today.
Regards,
Colin Tedards
Editor, The Bleeding Edge
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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.
