NVIDIA Still On a Roll Amid Rising Competition

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NVIDIA (NASDAQ: NVDA) last week reported its second quarter results which beat all estimates. However, after three straight quarters of revenue growth above 200%, its growth of 122% seems a tad disappointing and its shares fell 8% in extended trading. This is a slight pullback after an astronomical rally following the AI boom. Its stock has zoomed over 750% since 2023 and 150% this year.

NVIDIA’s Financials

NVIDIA’s second quarter revenues grew 122% to $30.4 billion, ahead of market estimates of $28.7 billion. Non GAAP EPS was $0.68, also ahead of market estimates of $0.64.

By segment, data center revenues grew 154% to $26.3 billion. Gaming and AI PC revenues grew 16% to $2.9 billion. Professional Visualization revenue grew 20% to $454 million. Automotive and Robotics revenue grew 37% to $346 million.

For the third quarter, the company forecast revenues of $32.5 billion or 80% growth while analysts estimate revenue of $31.7 billion. The company expects gross margins to be in the mid-70% range for the full year versus analyst estimates of 76.4%. Q2 gross margin was down to 75.1% down from 78.4% in Q1 but up from 70.1% a year ago.?

NVIDIA’s Data Center Growth

NVIDIA’s Data Center segment continues to fuel its growth. Accounting for 87% of total revenue, it is driven by strong demand for NVIDIA Hopper, GPU computing, and its networking platforms. Cloud service providers represented roughly 45% of the Data Center revenue, and over 50% was from the consumer Internet and enterprise companies including Microsoft, Alphabet, Amazon, Google, Meta, and Tesla.?

During the earnings call, NVIDIA disclosed that inference accounted for over 40% of its Data Center revenue over the past four quarters. While demand for its Hopper platform remains strong, anticipation for its recently released Blackwell platform is exceptional. Hopper shipments are expected to increase in the second half of the current fiscal. Blackwell production ramp is scheduled to begin in the fourth quarter and continue into next fiscal year ’26.?

NVIDIA’s Rising Competition

NVIDIA dominates the market for AI chips with 70%- 95% share. Apart from rival chipmakers like Intel and AMD, its Big Tech customers are now manufacturing their own chips. To counter the rising competition, NVIDIA is releasing a new AI chip architecture every year, rather than alternate years. It remains to be seen how long NVIDIA can maintain its strong growth and dominance given how fast the industry is changing.

NVIDIA is currently trading at $119.37 and a market capitalization of $2.93 trillion. It hit a 52-week high of $140.76 in June and a 52-week low of $39.23 in October last year. The stock underwent a 10 to 1 stock split in June.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

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