Countdown to Nvidia earnings and Arm Holdings setting up an AI chip unit
TLDRThe transcript discusses the anticipation surrounding Nvidia's earnings report on May 22nd and the potential impact on the AI chip market. Nvidia's stock price has risen, and it is projected that AI will significantly contribute to total chip revenue, increasing from 5% in 2022 to 25% by 2027. The company is favored for its control over the ecosystem and the launch of its new Blackwell chip. Meanwhile, Arm Holdings is reportedly setting up an AI division and plans to launch an AI chip prototype by 2025, which could lead to a spinoff of their AI chip business. This move could put Arm in competition with its current customer base, including Nvidia and Apple. Analysts are skeptical about Arm's plans, but the focus remains on Nvidia's earnings and how they might influence the broader AI sector.
Takeaways
- 📈 **Nvidia's Upcoming Earnings**: Nvidia is anticipated to report earnings on the 22nd of this month, with its 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 the 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 in the second half of the year.
- 💰 **Revenue Projections**: Early whisper numbers suggest Nvidia's total revenue for the April quarter could be $26 billion, with at least $23 billion expected to come 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 ARM in competition with its current customer base, including Nvidia and Apple.
- 📉 **ARM's Potential Market Impact**: If ARM's AI chip business were to spin off, it could significantly pivot ARM's business model and impact the market dynamics.
- 📊 **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 market will be closely watching how Nvidia's stock reacts post-earnings, as it could influence investment flows into semi-conductors or other sectors like software.
- 📌 **Nvidia as a Core AI Player**: Despite potential earnings disappointments, Nvidia is seen as a core anchor in the AI sector, with many not quickly moving away from the stock even if there is a decline.
- 📝 **Impact on AI Halo Stocks**: The effect of Nvidia's earnings on other AI-related stocks, such as Broadcom, Cadence Design, and AMD, will be closely monitored as these stocks have seen a lull in performance since their peak in March.
- ⏳ **Waiting for a Catalyst**: Other AI halo stocks are in need of a positive catalyst to resurrect their performance, which could potentially come from Nvidia's earnings report.
Q & A
What is the significance of the upcoming Nvidia earnings report?
-The Nvidia earnings report is significant because it will provide insights into the company's financial performance and potentially impact the stock price. It is also a key event for investors and analysts to gauge the company's position in the AI chip market.
What is Arm Holdings' plan regarding AI chips?
-Arm Holdings is reportedly setting up an AI division and plans to launch an AI chip prototype by 2025. This move would represent a major pivot for Arm's business model and could eventually lead to a spinoff of their AI chip business.
How does the potential development of Arm's AI chip affect its relationship with current customers like Nvidia and Apple?
-The development of Arm's AI chip could put Arm in competition with its current customer base, including Nvidia and Apple. This might lead to skepticism and concerns among some analysts and customers about the future of their partnerships.
What is the projected growth of AI as a percentage of total chip revenue by 2027 according to Jeffries?
-Jeffries estimates that AI as a percentage of total chip revenue will grow from 5% in 2022 to 25% by 2027, indicating a significant increase in the importance of AI chips in the market.
What is the expected total revenue for Nvidia for the April quarter?
-Early whisper numbers suggest that Nvidia's total revenue for the April quarter will be $26 billion, with at least $23 billion expected to come specifically from data center revenues.
How do analysts view the stock trading of Nvidia compared to Arm?
-Analysts view Nvidia's stock trading as significantly higher compared to Arm. They continue to revise their estimates for Nvidia, indicating a strong market interest and confidence in the company.
What is the potential impact of Nvidia's earnings on the broader AI sector?
-Nvidia's earnings report could have a significant impact on the rest of the AI sector, influencing the performance and direction of other companies in the AI halo. It is seen as a core anchor in the AI market.
How do analysts suggest investors should approach the potential pullback in Nvidia's stock?
-Jeffries suggests that a pullback in Nvidia's stock is a good time for investors to reload, as it is too early to determine the winners and losers in the AI market. They consider Nvidia a favorite in the sector.
What is the general sentiment towards Nvidia among investors and analysts?
-The general sentiment is bullish on Nvidia, with many analysts and investors considering it a core anchor in the AI market. Even if there is a disappointing earnings report, it is unlikely that many would quickly move away from Nvidia.
Which companies are seen as part of the AI halo and are in need of a performance boost?
-Companies like Broadcom, Cadence Design, and AMD are seen as part of the AI halo. These stocks have not performed well in the last 60 days and are in need of a positive catalyst to resurrect their performance.
What is the expected reaction of the market to Nvidia's earnings report?
-The expected reaction is that if Nvidia's earnings report is positive, it will pull more money into the semi-conductor sector. If it goes lower, it might drive momentum out and possibly into software.
Outlines
🔍 ARM's New AI Division and Nvidia's Upcoming Earnings
ARM Holdings is reportedly establishing an AI division and aims to launch an AI chip prototype by 2025, initiating talks with foundries to support this venture, which could potentially lead to a spinoff of their AI chip business. This move places ARM in direct competition with its existing customer base, including tech giants like Nvidia and Apple, sparking skepticism among analysts. Meanwhile, Nvidia is set to report its earnings on May 22nd, with expectations of significant growth in AI-related revenues, from 5% of total chip revenue in 2022 to an estimated 25% by 2027. The anticipation of Nvidia's report has led to a 5% increase in its share price over the past month, with total revenue for the April quarter expected to surpass Wall Street's estimates. Nvidia remains a favorite in the semiconductor industry, with its comprehensive control over the AI ecosystem and the upcoming launch of its Blackwell chip.
Mindmap
Keywords
💡Nvidia earnings
💡Arm Holdings
💡AI chips
💡Prototype by 2025
💡Foundries
💡Spinoff
💡Business model
💡Competition
💡Deep budgets and pockets
💡Blackwell chip
💡Stock trading
Highlights
Nvidia is set to report earnings on the 22nd of this month, with significant attention from the market.
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 begun talks with foundries to support the new AI chip part.
There is speculation that Arm's AI chip business could eventually spin off, potentially putting them in competition with current customers like Nvidia and Apple.
Some analysts are skeptical about the report on Arm's AI chip plans due to the potential conflict with their current business model.
Nvidia's share price has seen an increase, with estimates suggesting AI could represent 25% of total chip revenue by 2027.
The hyperscalers' deep budgets and spending promises are expected to continue driving growth in the AI chip sector.
Nvidia is favored for its control over the entire ecosystem and the launch of its new Blackwell chip in the second half of the year.
Early whisper numbers suggest Nvidia's total revenue for the April quarter could be $26 billion.
At least $23 billion of Nvidia's projected revenue is expected to come specifically from data center revenues.
Analysts are revising their estimates for Nvidia leading up to the earnings report, with the stock trading higher.
Last year, Nvidia's stock reacted with a 24% pull after earnings, which could potentially drive more money into semis or software.
Adam Parker, who has become more cautious on mega-cap tech stocks, remains bullish on Nvidia.
Jeffries suggests that pullbacks are a time to reload on Nvidia, as it is too early to determine the winners and losers in the AI sector.
The street has bet that Nvidia is one of the winners in the AI space, even if it doesn't have to be the undisputed winner.
Nvidia is considered the core anchor of the AI sector, and even a disappointing earnings report is unlikely to shift sentiment significantly.
The effect of Nvidia's earnings on the rest of the AI sector is of particular interest.
Other companies like Broadcom, Cadence Design, and AMD, which had their peak in March, are in need of a positive catalyst to resurrect their performance.
