Nvidia posted strong first quarter results but investors might be missing a critical part of the story.
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00:00So biggest takeaways from NVIDIA and our outlook on the stock, I'd say the biggest takeaway for NVIDIA in the April quarter has to be on the guidance side, and specifically as far as China is concerned.
00:14Clearly, the guidance was slightly below expectations, but more importantly is the fact that they did allude to the fact that there was an $8 billion, essentially missed revenue opportunity tied to China.
00:28And listen, that's unfortunate in nature, but a couple of positives in the sense that it helped to de-risk the stock.
00:34The other thing I will say is the expectation going for the July quarter for most analysts was about a $4 to $5 billion hit from China.
00:42The fact that it was, you know, in fact, $8 billion actually tells you that the rest of the world or the rest of NVIDIA's business is actually running stronger than expected.
00:53And I would actually say, you know, that largely has to do with the fact that Blackwell is, you know, is gaining more momentum than we originally expected, not only from the hyperscalers like the Microsofts and the, you know, the Amazons and Metas of the world, but also some of those tier two and three players like the core weaves that are also increasing cash.
01:14Okay. So NVIDIA's 73% growth in the data center business. Do we think it's sustainable? I would say unlikely going to be sustainable.
01:22In fact, we've seen growth rates decelerate here in recent quarters within the data center business.
01:29And, you know, clearly just the law of numbers is going to cause growth rates to continue to decelerate here over the next couple of quarters.
01:37I mean, we've seen essentially triple digit growth rates, you know, for essentially a six, seven quarter period of time back in 23, 2024.
01:46We're now kind of, you know, decelerating towards growth rates that are probably going to be, you know, 50% or so here over the next two quarters and further decelerate as you go into 2026 and 2027.
01:56I would say expect the run rate to get closer to, you know, as far as data centers is concerned, maybe 20%.
02:03It's something that's more sustainable in nature as we kind of look out maybe six, seven quarters down the road from that.
02:10But nonetheless, I mean, you start thinking about where the multiples are and, you know, we think this is still a compelling opportunity.