NVIDIA’s top line results exceeded expectations, with 3Q revenues $2.5 billion above guidance and 4Q guided above consensus estimates and about in line with what the buy side wanted to see. Demand for GPUs remains strong, with Blackwell shipments tracking above management’s prior expectations and Hopper GPUs showing potential for further sequential growth ahead, even as Blackwell ramps.
Enterprise AI and emerging use cases like “physical AI” were discussed as key growth drivers, as were sovereign AI buildouts and demand from core cloud and consumer internet customer bases. The technology is clearly resonating with a broad and growing customer base.
Challenges included a year-over-year decline in networking revenues, despite growth in specific products like Infiniband and SpectrumX. Gross margins also remain debated, though management’s view of an expected recovery to the mid-70% range by the second half of next year was an incremental positive.
CEO Jensen Huang addressed an emerging debate about potential slowing in model “scaling laws” – the empirical finding that, to-date, models become “smarter” as they are fed more data. Huang weighed in on the debate by pointing out growing opportunities for GPU usage in model re-training and inference scaling – both of which represent compute-intensive phases for model development which exist beyond initial development.
So all said no major surprises emerged this quarter, but nice validation that the longer-term investment thesis remains intact.
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John T. Belton, CFA
ONE CORPORATE CENTER RYE, NY 10580 Gabelli Funds TEL (914) 921-5100
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