-       Competitors like AMD and Intel will release GPUs on par with NVDA but will have trouble gaining market share because of NVDA’s proprietary software platform, CUDA. The CUDA software platform can only be run on Nvidia GPUs and allows programmers to harness the power of the GPU to develop AI models and perform various calculations, such as complex math problems, simulations, and AI tasks. Furthermore, most AI models are built using CUDA, as NVIDIA holds 92% of the market share in data center GPUs. This makes it very difficult for data centers to switch providers, as developers will opt for Nvidia because their AI models were built with CUDA.

-       Demand for Nvidia GPUs will continue to grow, as they play a crucial role in powering data centers. Data center operators like Amazon, Google, and Microsoft continue to expand globally, as businesses gravitate to their cloud services, which is accelerating demand for GPUs.  

-       Industries beyond the realm of technology, such as healthcare, manufacturing, automotive, and weather forecasting, are rapidly integrating AI technology, presenting significant opportunities for Nvidia. For instance, Nvidia is assisting pharmaceutical and biopharmaceutical companies in expediting drug discovery and development processes using AI and accelerated computing, ultimately reducing both time and expenses. Moreover, Nvidia is collaborating with numerous automotive entities, including car manufacturers, truck manufacturers, robotaxi operators, sensor manufacturers, and startups, to create and implement AI systems for autonomous vehicles. Furthermore, in response to the urgent need to mitigate the $140 billion in economic damages caused by extreme weather events linked to climate change, Nvidia has introduced the Earth-2 climate digital twin cloud platform. This innovative platform enables the simulation and visualization of weather patterns at high resolutions and affordable costs, thereby accelerating efforts to address climate-related challenges. Lastly, manufacturers use Nvidia's AI and analytics tools to optimize manufacturing processes and workflows. By analyzing large datasets generated by production lines, AI algorithms can identify inefficiencies, bottlenecks, and opportunities for improvement, leading to increased productivity and cost savings.

-       NVDA's strong total cash and short-term investments position of $25.98 billion allows the company to make strategic acquisitions, invest in new technologies, and/or return capital to shareholders through dividends and share repurchases.

Negative Outlooks/Risks

-       NVDA’s massive valuation hinges on whether it can stay ahead of its competitors. Nvidia’s rivals consist of big chip makers, cloud computing vendors, and startups. For instance, big chip maker Advanced Micro Devices (AMD) will be releasing its MI350 AI GPU in the second half of 2024 to better compete against NVDA’s B200 AI GPU. Intel, another chip maker, recently released Gaudi 3, its third-generation AI accelerator chip. Intel claims that Gaudi 3 is faster than NVDA’s H100 for AI tasks and will be competitive with the B200 AI GPU. Cloud computing giants such as Amazon, Microsoft, Meta, and Google want to be less reliant on Nvidia and are designing proprietary chips for both their internal needs and to serve cloud customers. Venture-backed startup company Cerebras says its chip has 50 times the computing power of Nvidia’s H100. Cerebras also claims that its computing platform, called CS-3, can train large language models in one day, compared to one month for Nvidia-based platforms.

-       The U.S. Government announced licensing requirements that negatively impacted Nvidia chip exports to China. This has harmed NVDA’s competitive position in the country, as sales to China decreased as a percentage of total Data Center revenue from 19% in fiscal year 2023 to 14% in fiscal year 2024. Additionally, if the U.S. government further limits NVDA’s ability to export all chips to China, then the company could lose out on billions of dollars in revenue.

 Financial Results and Outlook

NVDA recorded revenue of $22.1 billion in the fourth quarter of fiscal 2024, which ended on January 28, 2024. Revenue for the quarter exceeded guidance of $20 billion and was up 22% from Q3 and up 265% from the same quarter in the previous year. The increase came mostly from data center revenue of $18.4 billion, up 27% from Q3 and up 409% from a year ago.

Full-year 2024 revenue of $60.9 billion was record-breaking, up 126% year over year. 77.8% of FY2024 revenue came from the Compute and Networking segment, which was led by higher data center revenue due to higher shipments of the Hopper GPU computing platform for the training of large language models, recommendation engines, and generative AI applications.

In Q4FY24, GAAP diluted EPS was $4.93, up 33% from the previous quarter and up 765% from a year ago.