① Nvidia's Q1 net profit rose 628% year on year, and the performance far exceeded Wall Street expectations; ② Hwang In-hoon said at the performance meeting that it has been a while since Blackwell was put into production and that the company is preparing for the “next wave of growth”; ③ In the A-share market, the new Nvidia concept is “immature”, and investors need to be careful when screening targets.
Finance Association, May 23 (Reporter Wang Biwei) This morning, Beijing time, the Nvidia (NVDA.US) 2024 quarterly report and performance telephone briefing arrived as scheduled. In Q1 of this year, Nvidia once again created a myth. Net profit rose 628% year over year, far exceeding Wall Street expectations. At the performance conference, Wong In-hoon called “the next industrial revolution has begun.”
In the domestic market, in addition to suppliers that have cooperated with Nvidia for a long time, such as Fulian Industries (601138.SH) and Inspur Information (000977.SZ), which have continued to perform strongly in the capital market, the “high-speed copper cable” and “glass substrate” concepts that are popular due to new Nvidia products have recently gained attention. The business development of related concept stocks such as Lixun Precision (002475.SZ), Shenglan (300843.SZ), and Vogue Optoelectronics (603773.SH) has become the focus of the market.
Nvidia's Q1 net profit of $14.8 billion surpassed Wall Street expectations
According to financial reports, Nvidia achieved revenue of 26 billion US dollars in the first fiscal quarter, an increase of 262% over the same period last year; Q1 net profit of 14.81 billion US dollars, up 628% year on year; and gross margin reached 78.4%, compared to 64.6% in the same period last year. In terms of dividends, Nvidia announced a split of 10 shares per share and increased its quarterly dividend by 150% to 10 cents per share.
Prior to the announcement of Nvidia's current results, Wall Street had expected Nvidia's revenue to grow 240% to US$24.6 billion in the first fiscal quarter, while net profit would increase 540% to US$13.1 billion. As can be seen, although Wall Street has given higher expectations, Nvidia has given stronger answers, exceeding market forecasts. Perhaps affected by this, as of press release, Nvidia has risen more than 5% after the market.
By business, the strength of Nvidia's data center business provided the greatest impetus for performance growth, achieving revenue of US$22.6 billion, a sharp increase of 427% compared with the same period last year, and an increase of 23% over the previous year. Nvidia's financial director Colette Kress said at the performance briefing, “Demand from customers in various segments (this fiscal quarter) was very strong. Among them, the demand from enterprises and consumer internet companies was the most obvious. Large cloud service providers are deploying and upgrading their infrastructure while also bringing us revenue growth.”
“Nvidia's launch of the Blackwell architecture and its complete suite of artificial intelligence computing solutions puts it in a leading position in AI accelerator solutions. The industry is shifting from using only large language models (LLMs) to training artificial intelligence models to deploying multi-modal models. Coupled with the increasingly indispensable need for artificial intelligence inference, hyperscale cloud computing service providers are greatly expanding their infrastructure, so Nvidia has become the biggest beneficiary of AI hardware vendors.” Akshara Bassi, senior analyst at Counterpoint Research, told the Financial Federation.
According to Counterpoint Research, the capital expenditure of global cloud computing service providers increased by only 4% in 2023. However, a 42% surge is expected in 2024, mainly due to significant investment in artificial intelligence infrastructure by US cloud computing service providers.
Additionally, Nvidia's gaming and AI PC business achieved revenue of US$2.6 billion, an increase of 18% year over year; the professional visualization business achieved revenue of US$427 million, an increase of 45% year over year; and the automotive business achieved revenue of US$329 million, an increase of 11% year over year.
In terms of the Chinese market, Colette Kress said at the performance conference that the company has added new products that do not require a license to the Chinese market. Since the promulgation of the new US export policy last year, there has been a clear impact on the revenue of the Chinese market.
This year, Nvidia introduced the “limited” GPU H20 for the Chinese market. A CIFA reporter learned from the industry that the H20 began accepting orders in March, but it has not been shipped yet. Earlier, there was news that the H20 will be shipped in Q2. Currently, Q2 is over halfway. This chip, which is very important to the Chinese market, may soon be launched.
Looking ahead to the future market, Huang Renxun said that with the launch of the next generation of Blackwell architecture chips, the company is preparing for “the next wave of growth”. He also revealed during the performance Q&A session that Blackwell has been in production for some time now, and shipments are expected to begin in the second quarter of fiscal year 2025.
Akshara Bassi believes that as GPU sales grow and its diversified AI software revenue stream increases, Nvidia is in a favorable strategic position in this growth wave. Nvidia expects second-quarter revenue to reach $28 billion, and the market expects $26.61 billion.
Nvidia's A-share “copper cable” and “glass substrate” concept with heat
Looking at the domestic market, there are currently a number of A-share listed companies that have publicly linked their business with Nvidia. The high level of market attention includes server supplier Fulian Industrial and Wave Information, optical module supplier Zhongji Xuchuang (300308.SZ), and downstream computing power leasing manufacturer Hongbo Co., Ltd. (002229.SZ). As Nvidia's performance gradually increased, “friends” closely cooperating with Nvidia generally continued their strong performance in the capital market this year. By the close of trading on the 22nd, IFF's stock price had risen more than 68% this year, and Wave Information had risen by more than 20%.
As one of the manufacturers most closely tied to Nvidia in China, IFF is currently one of the few A-share manufacturers that are determined to supply Nvidia's new GB200 product. The reporter learned earlier from IFF that Hongbai Technology, a subsidiary of IFF, exhibited various technologies and solutions such as next-generation AI servers and liquid cooling cabinets developed in cooperation with Nvidia at the Nvidia 2024 GTC AI conference, including the AI data center liquid cooling solution GB200 NVL72. Zheng Hongmeng, chairman of IFF, also said at a recent performance briefing: “In 2024, the company's AI servers are expected to account for 40% of the global market share.”
In addition to suppliers that have decided to cooperate with Nvidia, recently, with news that Nvidia's new GB200 GPU has begun mass production, related concepts such as “high-speed copper cable” and “glass substrate” are also on the A-share market.
A-share giant Lixun Precision, famous for its “fruit chain,” recently attracted attention due to its copper cable connection business. Lixun Precision told the reporter, “Electric connectivity is the most advantageous product line in the company's communications business segment. At the same time, we are also using this advantage to introduce optical connections, heat dissipation, power supplies, etc. to existing and potential customers. Whether it is sample delivery or products that have already been mass-produced and shipped, they have received high praise from customers, and the business is progressing well.”
It is worth mentioning that recently the company also “officially announced” a partnership with Nvidia. At the online performance briefing on the afternoon of May 6, Lixun Precision executives asked “Has cooperation been reached with Nvidia?” In response to the question, it was stated that “there are indirect and direct services to cloud computing and data center customers, including this one.”
In addition to Lixun Precision, manufacturers with related businesses such as Shenglan Co., Ltd., Shenyu Co., Ltd. (300563.SZ), and Wall Nuclear Materials (002130.SZ) also recently welcomed the second wave of the GB200 market after the GB200 press conference. LightCounting recently indicated that in the five years from 2023 to 2027, the high-speed copper cable market will continue to expand at an impressive compound annual growth rate (CAGR) of 25%.
It is worth reminding that a relevant practitioner told the reporter that currently copper cables can only achieve short-distance transmission; for the time being, it is still difficult to completely replace optical modules; light is still the mainstream technology. Under such circumstances, investors need to be more careful in screening concept stocks.
Furthermore, in terms of glass substrates, the stock prices of manufacturers such as Vogue Optoelectronics, Wufang Optoelectronics (002962.SZ), and Lehman Optoelectronics (300162.SZ), which are concept stocks on glass substrates in the A-share market, have soared in the short term due to the fact that glass substrates are expected to be used for advanced packaging in the next two years or so.
However, CFC reporters learned in multiple interviews that at present, most A-share glass substrate concept manufacturers' related products are mainly used in display product production and are not used in semiconductor packaging. Vogue Optoelectronics is one of the fastest progressing groups. Its securities department told the reporter that its technology related to glass substrate packaging has been verified, but it has not yet been mass-produced.