High Technology Portfolio
Chipmaker Nvidia (NVDA: $131) continued its phenomenal streak with a blowout fourth-quarter performance, reporting $39.3 billion in revenue last night, up 78% YoY compared to $22.1 billion a year ago. Profits continued amazingly strong, coming in at $22.1 billion, or $0.89 per share, up from $12.8 billion, or $0.52 in the prior year, driven by growing sales and order backlogs across its AI offerings.
For the full year, it reported $130 billion in sales, up 117%, compared to $60 billion a year ago, with a profit of $74.3 billion, or $2.99 per share, against $32.3 billion, or $1.30. These are undeniably impressive figures, and to put things in perspective, just four years ago, Nvidia ended its fiscal year 2020 with total annual sales of $10 billion, which means this is a 13-fold growth in less than half a decade.
The company benefited from the significant ramp-up in the sales of its long-awaited AI chips, Blackwell. As you can expect, Nvidia’s data centers business led the way with $36 billion and $115 billion in sales, up 93% and 142% on a YoY basis, during the quarter and the full year, respectively. Gaming and AI PCs produced $2.5 billion, down 11% YoY.
The data center unit represents 91% of total revenue, and its new Blackwell chips are already at $11 billion in sales during the fourth quarter. In the future, the company’s performance will depend on how quickly it can make and ship this blockbuster new GPU since it already has order backlogs ranging from 12 to 18 months from some of the largest cloud service providers and AI companies – Microsoft, Amazon, Facebook, Google, xAI (Tesla), and OpenAI among many others, including the largest countries in the world.
Right now, the functioning of Artificial Intelligence remains incredibly simple. As Nvidia’s technology progresses, models will think and reason more deeply to develop novel insights. Nvidia believes that this will require at least 100x more computing power than the current models, meaning we will see substantially more demand for Nvidia’s GPUs, alongside other critical AI and networking infrastructure in the years ahead.
With this, all that hue and cry surrounding Deepseek’s efficiencies, or potential new tariffs by the Trump administration, which resulted in a $600 billion rout in the stock last month, the biggest one-day decline in history, can finally be laid to rest. While earnings calls in the weeks before the actual results were announced led to mixed stock reactions, including many pessimistic forecasts from analysts, this quarter’s results highlight the company’s critical role in the AI-driven market. The demand for AI chips continues to accelerate, driven by an insatiable need for advanced computing power. Moreover, the U.S. government has affirmed its commitment to policies that strengthen homegrown tech giants and uphold the country’s leadership in artificial intelligence.
We believe the $3.2 trillion company still has a long way to go upwards as it continues to unlock value for investors with generous stock buybacks - $34 billion last year. It has $43 billion in cash, just $10 billion in debt, and $64 billion in cash flow. Our Target is $210, one of the highest on the Street, and our SP is $100.