Nvidia reported astonishing net income of $6.7 billion for the quarter ending July 30, a remarkable 422% surge from the same period last year. The company pointed out that its margin is bolstered by its software, as it markets high-end and complex items, like the HGX box that integrates eight H100 GPUs into one computer. While Nvidia is enjoying prodigious cash flow, their leading customers are investing heavily in Artificial Intelligence (AI) hardware, as well as crafting extensive AI models, yet are yet to profit from the technology.
Nvidia is having an incredible streak, with no signs of stopping. Their graphics processors, or GPUs, are what tech companies need to build AI applications like ChatGPT, particularly Nvidia's highest-end AI chip, the H100. This is reflected in their second fiscal quarter ending July 30, for which sales rose 171% to $13.51 billion and margins expanded 25 percentage points to 71.2%. Moreover, Nvidia says demand is likely to remain high next year and that they have secured additional stock to meet it. In addition, the company's stock has grown more than 200% this year so far.
Nvidia's net income for this quarter was a remarkable $6.7 billion, a 422% increase year-on-year. Analyst Chaim Siegel of Elazar Advisors commented that he had to raise his price target to $1,600, suggesting a multiple of 13 times 2024 earnings per share.
The impressive capital Nvidia is making is in stark contrast to their customer base, who are making large AI investments but have not yet seen returns. Half of Nvidia's data center revenue is from cloud providers and large internet companies, such as Microsoft, who have been using Nvidia H100 GPUs for Azure and OpenAI. Meta has forecast spending $30 billion this year, and some startups are going into debt to purchase Nvidia GPUs in order to rent them out.
Nvidia attributes their strong margins to their software and the complexity of their products, such as their HGX box comprising of 8 H100s costing around $300,000. This advanced system is formed using 35,000 parts. Their customers often opt for the complete system, rather than just the H100 chip, due to the advantages of Nvidia's Cuda AI software.
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