Nvidia (NVDA)
is
set
to
release
its
fourth-quarter
earnings
report
on
February
21,
after
the
market
close.
Here’s
Morningstar’s
take
on
what
to
look
for
in
Nvidia’s
earnings
and
stock.
This
business
dominates
Nvidia’s
revenue,
earnings,
and
valuation.
The
company
has
continued
to
smash
through
its
prior
guidance
and
lift
its
estimates
for
the
coming
quarter.
We
anticipate
more
of
the
same.
The
biggest
factors
putting
a
ceiling
on
Nvidia’s
earnings
are
supply
constraints,
and
we’ll
be
interested
in
any
commentary
about
whether
(or
how
rapidly)
the
firm’s
manufacturing
partners
are
expanding
to
satisfy
demand
for
its
AI
graphics
processing
units.
Artificial
Intelligence
Will
be
Top
of
Mind
We
see
many
moving
pieces
within
the
AI
market
for
Nvidia
and
its
peers.
Some
questions
we
have:
What
impact
have
US
restrictions
on
AI
accelerator
sales
into
China
had?
What
progress
has
Nvidia
made
in
ensuring
its
new
products
are
compliant?
In
the
meantime,
will
the
restrictions
make
a
dent
in
the
firm’s
growth
trajectory?
What
is
the
demand
from
nation-states?
It
appears
sovereign
governments
are
buying
Nvidia
GPUs
to
build
supercomputers.
How
much
will
this
contribute
to
revenue
growth?
What
is
the
size
of
the
AI
accelerator
market?
Advanced
Micro
Devices
(AMD) stunningly
lifted
its
forecast
for
the
2027
industry
total
addressable
market
to
$400
billion
from
$150
billion.
This
includes
other
types
of
chips
besides
GPUs
but
still
implies
massive
GPU
growth,
and
Nvidia
still
dominates
the
AI
GPU
space.
What
capital
expenditure
is
Nvidia
seeing
in
the
data
centre?
Mega-cap
tech
companies
have
lifted
their
spending
plans
for
AI
in
2024,
and
cloud
leaders
might
buy
many
more
GPUs
than
what
the
market
anticipates
over
the
next
few
years.
Reuters
recently
reported
that
Nvidia
is
building
a
custom
chip
design
unit
that
might
help
build
specialized
AI
chips
for
others.
We’ll
be
interested
in
any
insight
around
this
initiative,
and
the
opportunities
it
might
open
for
Nvidia.
All
these
items
will
help
us
inform
our
estimates
for
future
data
centre
revenue
growth,
and
in
turn
free
cash
flow
generation
and
our
fair
value
estimate.
Key
Morningstar
Metrics
for
Nvidia
• Fair
Value
Estimate:
$480.00
• Morningstar
Rating:
2
stars
•
Morningstar Economic
Moat
Rating:
Wide
•
Morningstar Uncertainty
Rating:
Very
High
Fair
Value
Estimate
for
Nvidia
With
its
2-star
rating,
we
believe
Nvidia’s
stock
is
overvalued
compared
with
our
long-term
fair
value
estimate
of
$480
per
share,
which
implies
an
equity
value
of
over
$1.1
trillion,
a
fiscal
2024
price/adjusted
earnings
multiple
of
45
times,
and
a
fiscal
2025
forward
price/adjusted
earnings
multiple
of
31
times.
Our
fair
value
estimate
(and
Nvidia’s
stock
price)
will
be
driven
by
its
prospects
in
the
data centre segment
and
AI
GPUs,
for
better
or
worse.
We anticipate a
massive
expansion
in
the
AI
processor
market
in
the
decade
ahead,
and
we
see
room
for
tremendous
revenue
growth
both
at
Nvidia
and
for
competing
solutions
from
either
external
chipmakers
(like
AMD
or
Intel
(INTC)
or
in-house
solutions
developed
by hyperscalers (such
as
chips
from
Alphabet
(GOOGL),
Amazon
(AMZN),
or
others).
Nvidia’s
data
centre
business
has
already
achieved
exponential
growth,
rising
from
$3
billion
in
fiscal
2020
to
$15
billion
in
fiscal
2023.
The
firm
should
see
an
even
higher
inflection
point
in
fiscal
2024,
as
we
expect
data
centre
revenue
to
more
than
double
to
$41
billion. We
don’t
view
this
spike
as
coming
from
frontloaded
orders
or
a
buildup
of
excess
capacity,
as
we
model
46%
growth
in
fiscal
2025
data
centre
revenue
to
over
$60
billion.
We
model
growth
of
23%,
20%,
and
13%
in
the
following
three
years,
driving
the
segment’s
revenue
to
$100
billion
in
fiscal
2028. We
doubt
that
any
enterprise
wants
to
be
left
behind,
nor
does
any
cloud
computing
provider
want
to
be
shorthanded
when
providing
AI
GPUs
to
customers.
NVDA
Bulls
Say
Nvidia’s
GPUs
offer
industry-leading
parallel
processing,
which
was
historically
needed
in
PC
gaming
applications
but
has
expanded
into
crypto
mining,
AI,
and
perhaps
other
future
applications.
Nvidia’s
data
centre
GPUs
and
Cuda
software
platform
have
established
the
company
as
the
dominant
vendor
for
AI
model
training,
which
is
a
use
case
that
should
rise
exponentially
in
the
years
ahead.
The
firm
has
a
first-mover
advantage
in
the
autonomous
driving
market
that
could
lead
to
widespread
adoption
of
its
Drive
PX
self-driving
platform.
NVDA
Bears
Say
Nvidia
is
a
leading
AI
chip
vendor
today,
but
other
powerful
chipmakers
and
tech
titans
are
focused
on
in-house
chip
development.
Although
Cuda
is
preeminent
in
AI
training
software
and
tools,
leading
cloud
vendors
would
likely
prefer
to
see
greater
competition
in
this
space
and
may
shift
to
alternative
open-source
tools
if
they
were
to
arise.
Nvidia’s
gaming
GPU
business
has
often
seen
boom-or-bust
cycles
based
on
PC
demand,
and
more
recently
cryptocurrency
mining
as
well.
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