Equity Report 16.12.21 NVIDIA

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NVIDIA (TICKER: NVDA)

 

Introduction:

Nvidia Corporation is an artificial intelligence computing company. It operates through two segments: Graphics and Compute & Networking. Its Graphics segment includes GeForce graphics processing unit (GPU), the GeForce NOW game-streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual graphics processing unit (vGPU) software for cloud-based visual and virtual computing; and automotive platforms for infotainment systems. Its Compute & Networking segment includes Data Center platforms and systems for artificial intelligence (AI), high-performance computing (HPC), and accelerated computing; Mellanox networking and interconnect solutions; automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; and Jetson for robotics and other embedded platforms. Its platforms address markets such as Gaming, Professional Visualization, Data Center, and Automotive.

Number of employees: 18 975 people.

Q3 2021 Highlights:

Earnings: $1.17, adjusted, versus $1.11 expected, up 60% YoY.

Revenue: $7.10 billion versus $6.82 billion expected, up 50% YoY.

Nvidia expects to report around $7.4 billion in the current quarter, ending in January, higher than analyst expectations of $6.86 billion.

Revenue per Business:

Nvidia reported $2.9 billion in data center sales, up 55% from $1.9 billion in the same quarter last year. Nvidia CFO Colette Kress said that the growth was driven by GPU sales to “hyperscale customers,” an industry term that means cloud providers such as Amazon AWS, Microsoft Azure, and Google Cloud.

In gaming, Nvidia’s biggest market, reported $3.2 billion in sales, up 42% from $2.27 billion in the same quarter last year. The company said it was primarily due to increased sales of its GeForce consumer graphics processors, but the company said supply remained limited.

Nvidia’s gaming graphics cards now have software that prevents them from being used for cryptocurrency mining, the company said. Nvidia introduced dedicated graphics cards for crypto mining earlier this year to help meet some of the demand. It said it sold $105 million in cryptocurrency-specific graphics cards, down from $266 million in the quarter ending in August.

Nvidia said automotive sales were $135 million, which was up 8% annually, but down 11% from the previous quarter. Nvidia said the sequential decline occurred because automakers had other supply constraints but that self-driving programs using its processors continue to ramp up.

Nvidia’s professional visualization product line grew 144% annually to $577 million. That business is primarily high-end graphics processors for professionals. The segment continues to grow as firms buy powerful laptop workstations for their staff to use at home.

Over 25,000 companies worldwide use NVIDIA AI inference. A great new example is Microsoft Teams, which has nearly 250 million monthly active users. It uses NVIDIA AI to convert speech to text real-time during video calls in 28 languages in a cost-effective way.

Metaverse:

The real driver has been the metaverse—a virtual environment seen as the future of the internet. Facebook’s name change to Meta Platforms and its huge investment in the concept has catapulted it into the minds of investors. Nvidia wants to be at the heart of the metaverse, unveiling platforms, software, and tools earlier this month to help make it a reality.

Last month, they announced general availability of Omniverse Enterprise, a platform for simulating physically accurate 3D world and digital twins. Professionals at over 700 companies are evaluating the platform, including BMW, Ericsson, Lockheed Martin and Sony Pictures. More than 70,000 individual creators have downloaded Omniverse since the open beta launch in December. There are approximately 40 million 3D designers in the global market.

Omniverse replication from NVIDIA is an engine for producing data to train robots, replicating augment real-world data with massive, diverse and physically accurate synthetic data sets to both accelerate the development of high-quality, high-performance AI across computing demand. NVIDIA Omniverse Avatar is their platform for generating interactive AI avatars. It connects several core NVIDIA SDKs including switch AI, computer vision, natural language understanding, recommendation engines and simulation. Applications including automated customer service, virtual collaboration and content solution. Replicator and avatar joined several other announced features and capabilities for Omniverse, including AI, AR, VR and simulation-based technologies.

Q3 GAAP EPS was $0.97, 83% from a year earlier. Non-GAAP EPS was $1.17, up 60% from a year ago, adjusting for our stock split. Q3 cash flow from operations was $1.5 billion, up from $1.3 billion a year earlier and down from $2.7 billion in the prior quarter.

Nvidia paid $100 million in dividends during the quarter.

Guidance Q4 2021

They expect sequential growth to be driven by Data Center and Gaming, more than offsetting a decline in CMP. Revenue is expected to be $7.4 billion plus or minus 2%. GAAP gross margins are expected to be 65.3%, respectively, plus or minus 50 basis points. GAAP operating expenses are expected to be approximately $2.02 billion. GAAP other income and expenses are both expected to be an expense of approximately $60 million, excluding gains and losses on non-affiliated investments. GAAP tax rate is expected to be 11%, plus or minus 1% excluding discrete items. Capital expenditures are expected to be approximately $250 million to $275 million.

SHARE PRICE – YTD, the stock surged by 113,9%. The share price (16/12/2021) closed at $285,55 per share.

Expected share price: $378,08 per share (+32,6% upside)

 

 

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