TF Securities: Expected to have a large shipment in Q4 - NVIDIA Blackwell

From Tianfeng Securities.

How do you view the Blackwell shipment pace of NVIDIA?

The company's Q2 revenue and profit basically meet expectations, with operating revenue of $30.0 billion (Bloomberg consensus expectation of $29 billion), a year-on-year increase of 122%, gross margin of 75.7% (Bloomberg consensus expectation of 75.5%), a quarter-on-quarter decrease of 3.2 percentage points, basically in line with previous guidance. Operating expenses were $3.93 billion.

Q3 revenue guidance slightly exceeds Bloomberg consensus expectations: revenue guidance for the third quarter is $32.5 billion (Bloomberg consensus expectation of $33 billion), with a gross margin of 74.4%, and a full-year gross margin in the mid-70s, with operating expenses of $4.3 billion.

Key Points:

1. NVIDIA guides that the Blackwell series is expected to have a large shipment in the fourth quarter, and the mask change has been completed. In the third quarter, in order to achieve better yield, the Blackwell series mask change has been completed, and NVIDIA will ship billions of dollars worth of Blackwell series in the fourth quarter, with the potential to ship tens of billions of dollars.

2. The demand for the H series is strong, and the company will launch new products in the second half of the year. NVIDIA's full-year gross margin guidance is around 75%, which means that the gross margin in the fourth quarter is expected to decrease to around 72%. Considering the proportion of different products and BOM differences, the total proportion of H200 and B100 is expected to increase in the fourth quarter.

3. The demand for Hopper and Blackwell series GPUs continues to grow strongly. We remain optimistic about NVIDIA's future training and inference, continuing to grow rapidly based on its data center chip and rack products, and from Hopper to Blackwell to Rubin product portfolio.

4. Rapid growth in software business: Nvidia NIM accelerates and simplifies model deployment. Companies in healthcare, energy, financial services, retail, transportation, and telecommunications are adopting NIM, including Amway, Lowe's, and Uber. System integrators, technology solution providers, and system builders are bringing NVIDIA NIM agent blueprints to enterprises. NVIDIA NIM and NIM agent blueprints can be obtained through the NVIDIA AI Enterprise software platform, which is gaining momentum. We expect NVIDIA's software, SaaS, and support revenue to approach a $2 billion annual run rate this year, with NVIDIA AI Enterprise significantly driving growth.

5. From a supply perspective, we believe that there is still room for expansion in the supply of the H series in the second half of next year.

Slightly lower revenue and profit forecasts for CY24, but higher revenue and profit forecasts for CY25

Considering the delay and changes in product structure, we have slightly lowered revenue and profit forecasts for CY24 and raised revenue and profit forecasts for CY25:

Previously, revenue and profit for CY2024-2026 were $134.6/$203.8/$285.3 billion and non-GAAP net profit of $79.5/$121.3/$171.2 billion for CY2024-2026. Updated figures show revenue and profit for CY2024-2026 at $128.3/$205.7/$288.0 billion and non-GAAP net profit of $75.7/$122.5/$172.8 billion for CY2024-2026Continue to maintain a "buy" rating.

Risk Warning:

Cloud Capex below expectations, competition in the AI chip market, hardware sales below expectations, AI development below expectations