Nvidia had a smashing quarter, but those data center sales numbers are mighty concerning
Nvidia’s second-quarter results are out, and it was a top- and bottom-line beat, with revenue of $46.74 billion surpassing expectations of $46.23 billion.
However, the sales beat is not due to any positive surprise in its all-important data center business, the one responsible for the overwhelming majority of that revenue and which modestly missed expectations. The knee-jerk reaction: the stock is sliding, down 4% immediately afterward.
So, if not data centers, where’s the sales growth? Video games, of course! Nvidia’s gaming division, its golden goose long before generating images of celebrities eating spaghetti was even a thought, scored $4.29 billion in revenue in the second quarter, up 49% year over year — a record.
Nvidia made over $26 billion in net income in its second quarter, putting it third among S&P 500 companies. Heck, if you zeroed in on just its de facto “asset management” arm — which is included under “net other income” — that division would be one of the 50 most profitable companies in the S&P 500.
Nvidia, the asset manager, had a massive Q2 thanks to CoreWeave’s rally. According to CFO commentary, “Net other income for the second quarter was $2.2 billion, primarily driven by gains in a publicly-held equity security,” which certainly refers to CoreWeave, the AI darling that offers access to Nvidia’s GPUs, rose 175% during Nvidia’s fiscal Q2, and which Nvidia owns a stake in.
The chip designer’s fiscal second quarter was a tumultuous and momentous period. Export curbs introduced in mid-April effectively locked the company out of China’s AI market. Nvidia’s public and private pressure campaign to regain access to this market ultimately bore fruit, but the company did not receive any export licenses for the H20s until the quarter was over.
The Takeaway
Despite this, Nvidia managed to become the first $4 trillion company by market cap during its fiscal Q2, as receding recession fears and hyperscalers’ renewed commitment to their AI capex binges buoyed the chip designer to never-before-seen heights. Guidance for the current quarter is a little ahead of estimates.