When nVidia reports on August 28th, expect heightened volatility as options implied volatility sits at 15% versus a 10%two-year average. Two divergent themes are at play: (1) Continued strongAI-fueled capex led by the technology titans Amazon, Google, Meta and Microsoft juxtaposed against (2) a delayed next-generation product Blackwell. With the stock up 20% since they reported their
nVidia CEO Jensen Huang first unveiled the Blackwell platform at GTC in mid-March, stating the platform has 4x better training performance and 30x better inference than the current Hooper line. The platform was expected to ship later this year with material contribution in theirJanuary quarter. The Information reported early this month that the Blackwell platform was experiencing design flaws and, as a result, will be delayed by at least three months.
Cloud Service Provider Spend Remains Strong
The Cloud Service Providers continued their aggressive stance toward AI investments this quarter, highlighted below.
· Microsoft increased its capital expenditures on a sequential basis to meet demand and noted that capex will increase in 2025vs. 2024.
· Meta increased their 2024 capex guidance from$35-40 billion to $37-40 billion.
· AWS expects capex to be higher in 2H of this year vs. 1H.
· Google expects to spend $12 billion+ per quarter through the end of 2024.
Early signs of Gen AI Monetization
The biggest pushback on the massive AI infrastructure spending, nVidia being the biggest beneficiary, is that few companies are able to monetize their investment. This past quarter, two companies in particular ServiceNow and Palantir showed a nice acceleration in current and future growth attributed to their AI investment, see below taken from Daloopa’s data sheets.
ServiceNow
Palantir
Net Net on NVDA Quarter
With the stock up 20% since the last quarter and theaforementioned Blackwell issues, risk seems skewed to the downside based onpossible October quarter guidance. However, NVDA’s long-term position seemsfirmly entrenched; thus, weakness in the stock will likely be short-lived.
