Countdown to Nvidia earnings and Arm Holdings setting up an AI chip unit

CNBC Television
13 May 202404:37

TLDRNVIDIA is set to report its earnings on May 22, with expectations high due to its pivotal role in AI chip revenue, projected to grow from 5% in 2022 to 25% by 2027. Meanwhile, Arm Holdings is reportedly establishing an AI division to develop its own AI chips, aiming for a prototype by 2025, potentially leading to a spinoff of this business. This move could position Arm in direct competition with current clients like NVIDIA and Apple. As NVIDIA continues to lead, the market watches how its upcoming earnings will impact the broader AI and semiconductor sectors.

Takeaways

  • 📈 **Nvidia Earnings Anticipation**: Nvidia's earnings are awaited on the 22nd of this month, with the share price having risen by about 5% in the last month.
  • 🚀 **AI's Growing Revenue Share**: Jeffries estimates that AI's share of total chip revenue will increase from 5% in 2022 to 25% by 2027, indicating significant growth in this sector.
  • 💼 **Nvidia's Ecosystem Control**: Nvidia is favored due to its control over the entire ecosystem and the launch of its new Blackwell chip, which is expected to contribute to its growth.
  • 💰 **Revenue Projections**: Early whisper numbers suggest Nvidia's total revenue for the April quarter could be $26 billion, with at least $23 billion expected from data center revenues.
  • 🤔 **Skepticism Around ARM's AI Division**: There is skepticism regarding ARM's reported plans to set up an AI division and launch an AI chip prototype by 2025, as it could put them in competition with their current customer base.
  • 📉 **ARM's Potential Market Impact**: ARM's move into AI could lead to a spinoff of their AI chip business, which might affect the market dynamics and their relationships with customers like Nvidia and Apple.
  • 📊 **Analysts' Valuation Revisions**: Analysts have been revising their estimates for Nvidia, indicating a high level of interest and potential valuation adjustments leading up to the earnings report.
  • 🔍 **Post-Earnings Stock Reaction**: The stock market's reaction to Nvidia's earnings will be closely watched, as it could influence investment flows into semi-conductors or other sectors like software.
  • 🏆 **Nvidia as a Favorite in AI**: Despite the competition, Nvidia is considered a core player in the AI market, with some analysts believing it's too early to determine the ultimate winners in the AI space.
  • 📌 **Impact on AI Halo Stocks**: The performance of Nvidia's earnings could have a ripple effect on other AI-related stocks, which have seen a lull in performance since their peak in March.
  • ❓ **Uncertainty Among Mega Caps**: There is a cautious/negative sentiment towards mega cap tech stocks ahead of Nvidia's earnings, with some analysts remaining bullish on Nvidia.

Q & A

  • Which companies are mentioned in the transcript as being part of the mega caps?

    -The companies mentioned in the transcript as being part of the mega caps are Amazon, Apple, and NVIDIA.

  • What is ARM Holdings planning to develop?

    -ARM Holdings is planning to develop their own AI chips and is setting up an AI division.

  • What is the projected timeline for ARM's AI chip prototype launch?

    -ARM plans to launch an AI chip prototype by 2025.

  • What is the potential impact of ARM's AI chip on its current customer base?

    -The development of ARM's AI chip would put ARM in competition with its current customer base, which includes companies like NVIDIA and Apple.

  • What is the estimated percentage of total chip revenue that AI is expected to account for by 2027?

    -AI is expected to account for 25% of total chip revenue by 2027.

  • How does NVIDIA's control over the ecosystem and its new Blackwell chip contribute to its position in the market?

    -NVIDIA's control over the entire ecosystem and the launch of its new Blackwell chip for the second half of the year contribute to its position as a favorite in the market, driving growth especially with investments from hyperscalers.

  • What are the early whisper numbers for NVIDIA's total revenue for the April quarter?

    -The early whisper numbers for NVIDIA's total revenue for the April quarter are $26 billion.

  • What is the expected contribution from data center revenues to NVIDIA's total revenue?

    -At least $23 billion of NVIDIA's total revenue of $26 billion is expected to come specifically from data center revenues.

  • How did NVIDIA's stock perform before the earnings report on May 22?

    -NVIDIA's share price went up, hovering around 5% higher in the last month leading up to the earnings report on May 22.

  • What is the general sentiment among analysts regarding NVIDIA's stock post-earnings?

    -The sentiment is mixed, with some analysts expecting the stock to pull more money into semis if it goes lower, while others believe it could drive momentum into software.

  • What is the current status of NVIDIA's position in the AI market according to the street?

    -The street has placed its bet that NVIDIA is one of the winners in the AI market, not necessarily an undisputed winner, but certainly considered to be in the mix of top contenders.

  • What is the potential effect of NVIDIA's earnings on the rest of the AI halo?

    -It is suggested that NVIDIA's earnings could serve as a core anchor for AI holdings, and its performance might influence the direction of other companies in the AI sector.

Outlines

00:00

🔍 AI and Semiconductor Industry Update

This segment focuses on the evolving landscape of the semiconductor industry, specifically discussing the ambitions of ARM Holdings alongside giants like NVIDIA and Apple. ARM is reportedly setting up an AI division with plans to introduce an AI chip prototype by 2025, which could potentially lead to a spinoff of their AI chip business. This move is seen as a major pivot and could place ARM in direct competition with its existing customer base, including NVIDIA. The discussion also touches on NVIDIA's upcoming earnings report on May 22, with expectations of significant growth in AI chip revenue, projected to rise from 5% in 2022 to 25% by 2027. Analysts remain optimistic about NVIDIA, highlighting its strong market position and the anticipated impact of its earnings on other tech stocks like Broadcom, Cadence Design, and AMD, which are seen as dependent on positive news from NVIDIA to boost their performances.

Mindmap

Keywords

💡Nvidia earnings

Nvidia earnings refer to the financial results of Nvidia Corporation, a leading technology company specializing in graphics processing units (GPUs). In the context of the video, the upcoming earnings report is a significant event for investors and stakeholders as it reflects the company's performance and influences stock prices. The anticipation of Nvidia's earnings is a key theme as it impacts the broader technology and AI sectors.

💡Arm Holdings

Arm Holdings is a British semiconductor and software design company that provides processor architectures for various electronic devices. The script mentions that Arm is setting up an AI chip unit, indicating a strategic move to enter the artificial intelligence chip market, which is highly relevant to the video's discussion on the future of AI technology and its impact on the industry.

💡AI chips

AI chips are specialized microprocessors designed to efficiently perform the complex mathematical operations required for artificial intelligence applications. The development of AI chips by companies like Nvidia and Arm Holdings, as discussed in the video, is a pivotal aspect of advancing AI capabilities and is central to the competitive landscape of the tech industry.

💡Prototype by 2025

The term 'prototype by 2025' refers to Arm Holdings' plan to have a working model of their AI chip by the year 2025. This timeline is significant as it sets a benchmark for the company's innovation and development in the AI chip space, which is a key focus of the video's narrative on technological advancements.

💡Foundries

In the context of the script, foundries are manufacturing facilities that produce semiconductor chips. Arm Holdings is reported to be in talks with foundries to support the production of their new AI chip, which underscores the importance of manufacturing partnerships in the tech industry.

💡Spinoff

A spinoff in a business context refers to a separate company that is created from a larger company, often to focus on a specific product or market. The video suggests that Arm Holdings might eventually spin off their AI chip business, which would be a significant strategic move with implications for the company's market position and competition.

💡Business model

The business model refers to the way a company operates and generates revenue. For Arm Holdings, the development of AI chips represents a major pivot in their business model, as it moves them into a new market segment and potentially changes their revenue streams, which is a central theme in the video's discussion on corporate strategy.

💡Competition

Competition in this context refers to the rivalry between companies in the same industry. The script highlights that Arm's entry into the AI chip market could put them in competition with their current customer base, including major tech companies like Nvidia and Apple, which is a key point of analysis in the video.

💡Analysts

Analysts are experts who study various aspects of the market and provide insights and predictions based on their research. In the video, analysts' skepticism about Arm's AI chip plans and their revisions of estimates for Nvidia are important as they influence investor sentiment and market expectations.

💡Data center revenues

Data center revenues refer to the income generated from the operation of data centers, which are facilities used to house and manage large amounts of data. The video emphasizes that a significant portion of Nvidia's expected quarterly revenue will come from data center revenues, highlighting the growing importance of cloud computing and data storage in the tech industry.

💡Stock trading

Stock trading involves the buying and selling of shares of publicly traded companies. The video discusses how Nvidia's stock price has been performing leading up to their earnings report and how the stock's reaction post-earnings can influence investment strategies and market trends.

💡AI halo

The term 'AI halo' is used metaphorically in the video to describe the group of companies that are at the forefront of artificial intelligence technology, with Nvidia being a central player. The discussion around the AI halo focuses on how the performance and strategic moves of these companies can affect the broader technology market.

Highlights

Nvidia's earnings are anticipated, with a report scheduled for the 22nd of this month.

Arm Holdings is reportedly setting up an AI division and plans to launch an AI chip prototype by 2025.

The Nikkei reports that Arm Holdings has already begun talks with foundries to support the new AI chip part.

There is speculation that this could lead to a spinoff of Arm's AI chip business.

The potential AI chip from Arm would represent a significant pivot for the company's business model.

Arm's move into AI chips could put them in competition with current customers like Nvidia and Apple.

Some analysts are skeptical about the report on Arm's AI chip development due to potential market competition.

Nvidia's share price has risen, with an increase of 5% in the last month.

Jeffries estimates that AI will grow from 5% to 25% of total chip revenue by 2027.

Nvidia's control over the ecosystem and the launch of its new Blackwell chip positions it as a favorite in the AI market.

Early whisper numbers suggest Nvidia's total revenue for the April quarter could be $26 billion.

At least $23 billion of the projected revenue is expected to come from data center revenues.

Analysts are revising their estimates for Nvidia leading up to the earnings report.

Last year, Nvidia's stock had a 24% pull after earnings, indicating investor confidence.

Adam Parker remains bullish on Nvidia despite a more cautious stance on mega-cap tech stocks.

Jeffries suggests that pullbacks are a time to reload on Nvidia, as it is too early to determine winners in the AI market.

The street has bet on Nvidia being one of the winners in the AI sector.

The impact of Nvidia's earnings on the rest of the AI halo companies is a point of interest.

Other AI halo companies like Broadcom, Cadence Design, and AMD are in need of a positive catalyst to resurrect their performance.

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