Nvidia Sees ‘Several Billion’ in Blackwell Sales in 4Q | Bloomberg Businessweek

[Music] Bloomberg audio Studios podcasts radio news you're listening to Bloomberg business week with Carol masser and Tim stenc on Bloomberg Radio Nvidia results they are out they've been out now for I don't know about 15 minutes or so um our headline story written by uh Bloomberg's Ian King who we talked to at 2 o'clock ahead of this uh Nvidia which is really the chipmaker at the heart of the artificial intelligence boom gave a revenue forecast that felt short of some of the most optimistic estimates token concerns that its explosive growth is waning third quarter Revenue will be about 32.5 billion uh the company just put that out analysts had predicted 31.9 billion on average so that was a beat but some estimates ranged as high as 37.9 billion so almost 38 billion Nvidia shares now Tim just down about 9/10 of a percent so quite a bounce back they we're down more than 8% uh just in the few minutes after uh as Carol mentioned been about 21 minutes since we did get those numbers that's enough time I think for Ivan Feth Chief investment officer at Tigress Financial Partners to digest the numbers ahead of the call uh he's got a buy rating on the company stock a uh price target of $170 right now shares trade at in the after hours at $123 Ivan good to have you with us uh this earnings report impressive disappointing does it change your view at all on the company I think it's as expected it's positive they they beat and they guid it higher I mean expectations has been have been rising the stock is up a lot but this is part of a long very long-term play on AI adoption and Nvidia is the key component of it uh there estimates of over $250 billion doll in capital investment being spent by all of the major tech companies and the majority of that going to Nvidia which is powering these data centers that run these AI large Lear language learning models and that will continue and I I credit Tom CRA was saying from Cel sorry Cel systems that every company is going to be an AI company all types of companies are going to use AI in different ways to optimize Supply chains to Target customers for predictive analysis for marketing for customer interaction and engagement and so everybody is going to be investing in AI at some level and especially the more complex large language models are going to run on the most advanced Invidia gpus which right now is the hopper and then soon to be the Blackwell and then next year will be the Reuben Ivan shares of Super Micro computer today fell 19% the company said it's going to delay its annual Financial disclosures uh it said that it needs additional time to complete its assessment of the design and operating effect effectiveness of its internal controls over financial reporting I look at the supply chain function on the Bloomberg terminal I see that super micro is the third largest customer of Nvidia accounting for more Revenue than alphabet and more Revenue than Amazon and more Revenue than Dell does that concern you um not really uh they are uh a big consumer of Nvidia processors in fact uh not too long ago the CEO of super Marco was being interviewed he's a good friend of nvidia's CEO Jensen Wong and he keeps calling Jensen asking him for more and more processors and Jensen replied pleas I can't take all this pressure but the the demand exceeds the supply and if for some reason that super micro couldn't fulfill the order then it would go to meta which is also trying to get as much as they can from Nvidia and then all of the others so this demand well exceeds Supply so if there was for some reason a customer that couldn't take what they committed to Nvidia would not have a hard time replacing that Demand with another customer so from that standpoint the super micro issue right now is concerning but I think they will work its way through but as it affects nvidia's demand I'm not concerned okay hey what I do Wonder in the buildout this you know large language models generative AI Advanced AI the buildout which requires all these chips from Nvidia and and other equipment if you will from some other companies having said that is the buildout just going to be this straight line up or should we assume that there will be bubble moments within the buildout and so companies will see spurts of growth and spurts of spending like we've seen over the last year and a half or almost two years here and then we'll see maybe pauses um even though the long-term growth story may be there and the long-term impact on how we do everything may still be there well I think the demand will be strong and it'll be driven by fulfillment uh remember that a lot of the investment in AI from these companies is what is driving their competitive Advantage so companies cannot afford to lose ground on this front to other companies so I think that uh you will not see the ebb and flowing of capital investment I think this is one area that will stay steady so Ian especially budget out long term so we've seen enough of a payoff in these AI Investments that it makes sense that we're going to continue seeing the Investments well not not the payoff right now it is generating you know positive results for things but uh it has to still go a long way I mean to use uh as an example customer service engagement a lot of what you're seeing in um voice response system and uh chat windows on websites is all AI driven and some people complain about the interaction that will improve over time um but as far as pricing Dynamic pricing on websites um you know humans for a lot of these Dynamic pricing in the travel industry have not been making pricing decisions for two years and that will continue to be optimized by the use of AI so uh we see it on platforms like in Stam that uh Target ads based on what you seem to be interested in and it all keep improving so there is some payback being shown but we are still in the infy in the infancy of this and uh eventually we will have much better user engagement much better reaction and part of this whole large language learning process is the learning process that will continue to improve what's the biggest threat to Nvidia uh well some people feel that uh potential uh the from competition from AMD from many of these companies like apple I'm sorry Google I'm sorry uh Facebook designing their own processors and I think it will delineate that you're going to want for the most complex and the most Need for Speed you're going to want Nvidia and then you know sub routines and tertiary routines can be run on other less uh slower processors but the fear is that uh other processor other chip companies will eventually have things that can compete on some level however as I said by the time uh they catch up to the processing power of the hopper Nvidia has the black well by the time they would C catch up the Blackwell Nvidia has the Reuben coming out uh next year oh interesting yeah so these are these are the things to come and and it'll be interesting to see what they have to say about Blackwell uh in terms of four quarter if they can put some more specificity right and the one thing I say that if your business is dependent on theault tolerance if you will of the AI processing capability you're not going to cheapen out and go for a lesser processor you're going to want to go especially with your most demanding routines and inferences you're going to want to go with Nvidia is there any company that's even close to doing what Nvidia does at this point or not yet no because the other side of the coin is NVIDIA also has the software that goes along with this so it's the software which is as important as the hardware as the processor itself who are the smaller customers that Jensen Wong needs to go and find um well other companies that would use AI in some way and the majority of companies that are using this they are using it on a cloud hosted or hyperscaler platform like using uh aw us or Microsoft Azure or Google Cloud so uh which also you know that uh I think Ai and the access to it kind of is democratizing uh the process this is not just for the biggest companies but because you can buy it in such small bite sizes as far as minutes and time on a rented server or even the ability to rent servers you can buy Nvidia is processing power on a subscription basis so it doesn't require the massive investment in a Data Center and and with for the processors and the software and everything else you need to build it out so I think this is a tremendously democratizing process for businesses of all sizes and it comes down to the creativity and the ability to apply it so that's the real I think uh wave behind all this that it will be so ously applied in so many different ways all right so ivvan last question what's the headline on any research you might put out later tonight or tomorrow morning and do you change anything you've got a Target price uh price Target rather I should say on Nvidia of 170 share so what's the head go ahead maintain my buy I say strong quarter business Contin and they also by the way announced another $50 billion share repurchase so they are generating tremendous amounts of cash and uh you know a company like Nvidia and the world some of the world's leading leading companies like Microsoft Apple Google meta these are intellectual Capital intensive and not Financial Capital intensive so they tend to throw off a lot of cash and they continue to return a tremendous amount of cash to shareholders through these ongoing stock buybacks all right so with the buy rating in the stock down four and a half% in the aftermarket you're like yeah now you now you can even buy it on sale a little bit right a absolutely I I was kind of expecting the stock would be weak Because unless they reported just something tremend mendous you know the reaction would probably be to sell it so you look at historically the any any weakness in the stock has been a buying opportunity and I would say that this is the case as well interesting stuff hey Ivan thank you so much appreciate you uh spending so much time with us to break down and talk about Nvidia Ivan F Seth he a senior partner and chief investment officer at Tiger's Financial Partners