Latest / Best of Business / Sam Dickie: Fisher Funds expert on what Nvidia's earnings say about the tech sector

Transcript

Sam Dickie: Fisher Funds expert on what Nvidia's earnings say about the tech sector · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
• 0:13
  Speaker 1: and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: Now, NVIDIA, as I was telling you earlier, NVIDIA has
• 0:18
  Speaker 2: just reported its quarterly numbers, nearly $ 100 billion of revenue
• 0:22
  Speaker 2: in three months, which is more than double a year ago. Question,
• 0:25
  Speaker 2: of course, is, is the AI boom still going strong?
• 0:28
  Speaker 2: Sam Dickey from Fisher Funds is with us. Hey, Sam.
• 0:30
  Speaker 3: Good evening, Heather.
• 0:31
  Speaker 2: How good was that result?
• 0:34
  Speaker 3: Another outrageous result from the mighty NVIDIA. And like we said...
• 0:38
  Speaker 3: Last quarter, incredibly, the company's almost become boringly predictable. So
• 0:44
  Speaker 3: the $ 96 billion of revenue you talked about for the
• 0:46
  Speaker 3: quarter was up 106%. So that was a few billion
• 0:50
  Speaker 3: dollars higher than expectations. And then they guided for next
• 0:53
  Speaker 3: quarter's revenue to be a few billion dollars higher than
• 0:56
  Speaker 3: people expected also. So the old beat the quarter by
• 1:00
  Speaker 3: a few billion, raise guidance by a few billion has
• 1:02
  Speaker 3: been a predictable pattern. And in fact, they've done that
• 1:05
  Speaker 3: for almost 16 quarters straight now.
• 1:08
  Speaker 2: Now, I mean, I think it's fair to say that
• 1:10
  Speaker 2: the market's largely been waiting for the AI spending to
• 1:12
  Speaker 2: slow down.
• 1:13
  Speaker 1: Has it?
• 1:15
  Speaker 3: Well, not according to NVIDIA. So they are seeing demand
• 1:18
  Speaker 3: accelerating and unusually, this is very unusual for NVIDIA, they
• 1:22
  Speaker 3: gave guidance, revenue guidance for next fiscal year. So they're
• 1:26
  Speaker 3: currently about halfway through their fiscal year 2027 and they
• 1:30
  Speaker 3: gave guidance for fiscal year 28, such as their confidence.
• 1:33
  Speaker 3: So to give you a couple of numbers there, the
• 1:35
  Speaker 3: market had expected revenue for that year, of around $ 570
• 1:40
  Speaker 3: billion for the company. Ridiculous in and of itself. But today,
• 1:44
  Speaker 3: Jensen Huang told us that that's more likely to be
• 1:47
  Speaker 3: $ 700 billion.
• 1:48
  Speaker 2: Nutty, yeah.
• 1:50
  Speaker 3: And in fact, if he could get more memory chips,
• 1:52
  Speaker 3: and that's that other bottleneck you and I have talked
• 1:54
  Speaker 3: about a couple of times here, that number would be
• 1:56
  Speaker 3: more like $ 800 billion. So the numbers are almost so mind-blowing,
• 1:59
  Speaker 3: they sound like funny money.
• 2:00
  Speaker 1: Yeah, it does sound wild.
• 2:01
  Speaker 2: Okay, are there any cracks in the story, though?
• 2:04
  Speaker 3: Yeah, I think that's the rub. So this... Everything I've
• 2:09
  Speaker 3: told you, if you flew down from Mars, you'd probably
• 2:11
  Speaker 3: expect the stock to be up a lot, but it's
• 2:12
  Speaker 3: barely moved in a year, and that's despite the fact
• 2:14
  Speaker 3: the company's more than doubling its revenue base every 12 months.
• 2:17
  Speaker 3: So the market is concerned this is not sustainable, and
• 2:20
  Speaker 3: specifically they're concerned about this vendor financing or money merry-go-round that, again,
• 2:25
  Speaker 3: you and I have spoken about several times. So remember
• 2:28
  Speaker 3: the gist of that is that demand for AI models
• 2:32
  Speaker 3: and AI tokens from ChatGPT and Claude & Co. is
• 2:34
  Speaker 3: so strong that companies can't keep up with building compute
• 2:38
  Speaker 3: fast enough, and they can't fund that build-out. So NVIDIA
• 2:42
  Speaker 3: itself has started funding it. So in its bluntest form,
• 2:45
  Speaker 3: NVIDIA is funding its customers to buy its own product.
• 2:48
  Speaker 3: And Jensen put a number on that today. He said
• 2:50
  Speaker 3: a full quarter of that $ 700 billion of revenue I
• 2:55
  Speaker 3: talked about next year is driven by demand from customers
• 2:59
  Speaker 3: that are borrowing from NVIDIA to buy their product.
• 3:03
  Speaker 2: What does that mean for investors?
• 3:05
  Speaker 3: Well, unquestionably a bullish result and undoubtedly keeps the AI
• 3:08
  Speaker 3: bull case alive. But I think investors are increasingly asking
• 3:13
  Speaker 3: the right, more nuanced questions. So how is this extraordinary
• 3:17
  Speaker 3: data center build out? It's now eclipsed anything in history.
• 3:19
  Speaker 3: So we used to say it's on par to be
• 3:21
  Speaker 3: the same size as the railway build out as a
• 3:23
  Speaker 3: percentage of GDP, but it's now eclipsed that. How is
• 3:26
  Speaker 3: this extraordinary data center build out going to be financed
• 3:28
  Speaker 3: and how sustainable is this demand? the sellers are lending
• 3:32
  Speaker 3: to the buyers to buy their own product.
• 3:34
  Speaker 2: Well, exactly. I mean, that is a bit worrying, isn't it? Sam,
• 3:36
  Speaker 2: thank you very much as always. Sam Dickey, Fisher Funds,
• 3:39
  Speaker 2: 20 away from seven.
• 3:41
  Speaker 1: For more from Newstalk ZB, listen live on air or
• 3:44
  Speaker 1: online and keep our shows with you wherever you go
• 3:47
  Speaker 1: with our podcasts on iHeart Radio.