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Nvidia (NVDA) down 3% despite trillion-dollar tech valuation

By Joyanta Acharjee

16:21, 23 March 2022

The Nvidia (NVDA) logo on one of its graphics cards
Nvidia (NVDA) is known for its range of graphics cards and other tech hardware – Photo: Shutterstock

Nvidia (NVDA) held an Investor Day event on Tuesday where it talked about future market opportunities that include a building block of the metaverse and high-performance computing but was short on supply chain and financial guidance commentary.

The Santa Clara, California-headquartered company is known for its range of graphics cards used in video gaming. It also makes semiconductor chips and hardware used for high-end computing in data centres as well as data-networking equipment.

NVDA stock was down by as much as 3.5% Wednesday before recovering some losses. As at 11:30 EDT (UTC-4) the stock was changing hands at $263.90 per share and is down 12% for the year to date.

The company was keen to emphasise a total addressable market (TAM) of $1trn (£757bn, €909bn) for its combined areas of business distributed across gaming, automotive, chips and software.

A slide showing Nvdia's total addressable marketNvidia

Analysts however were sceptical on how this figure was agreed on and when it will filter through into earnings.

“The new trillion dollar TAM offers us with little to no assistance in figuring out how growth will flow into the model, particularly with limited to no explanation behind NVDA's calculation of TAM for each segment, or the timing as to when this outlook might be realized,” Wedbush Securities analyst Matt Bryson wrote in his latest research note.

Tuesday’s online event took place almost a month from the end of its current fiscal first quarter, but Nvidia CFO Colette Kress did not disclose any new financial guidance despite being pressed by analysts in a question-and-answer session.

“While we weren't expecting NVDA to update their quarterly revenue guide, management's choice not to talk to progress in the current quarter differed from last year,” Wedbush’s Bryson commented.

Supply chain

Nvidia management also didn’t address current supply chain issues that are preventing chips getting into the hands of customers.

Supply constraints linked to the Covid-19 pandemic have resulted in car makers slowing production as they wait for chip deliveries and PC gaming enthusiasts seeing limited inventory and higher prices for Nvidia’s RTX series of graphics cards, which are also popular with cryptocurrency miners.

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Company management did talk about the Omniverse, Nvidia’s cloud-based artificial intelligence (AI) simulation technology aimed at the robotics and content creation industries based on Pixar’s Universal Scene Description file format.

Slide showing off Nvidia's Omniverse businessNvidia

This technology can be used to build “digital twins” of products or operating environments in the way that models and wind tunnels are currently used in the aerospace industry.

"Worldwide there are over 25 million developers. And with artists and designers there are close to 45 million creators in the world and that number is growing faster than ever with the onset of growing demand for content and world creation as we move into the next generation of the World Wide Web, commonly referred to as the metaverse,” Richard Kerris, Nvidia’s VP of Omniverse Developer Platform said.


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Nvidia executives are valuing their Omniverse segment at $300bn.

A slide showing Nvidia's Omniverse valuation of $300bnNvidia

In his presentation, Kerris said the company was “building a long-term subscription-based model” for Omniverse services while Nvidia’s CFO said it was a driver of opportunity.

“Not only does Omniverse present a large software opportunity but it will also help drive a hardware opportunity as Omniverse runs on Nvidia-powered hardware,” CFO Kress added.

“Probably the most concrete takeaway, in our view, is that NVDA now sees large software revenue opportunities that we believe could/should add to its data centre hardware sales streams with NVDA categorising these revenues in the hundreds of millions annually today with a total market in the 100s of billions per their TAM analysis,” the Wedbush Securities analyst wrote.

Hyperscale computing

The other key message from Nvidia’s Investor Day was how the company was at the forefront of high-performance computing and artificial intelligence (AI).

The company will offer two products aimed at high-performance computing and AI: the Grace Hopper superchip and the Grace central processing unit (CPU) superchip. Both products take their name from the late US Navy Rear Admiral Grace Hopper, an early pioneer of computer programming.

Slide showing off Nvidia's new Grace Hopper rangeNvidia

Nvidia founder and CEO Jensen Huang said that its new Grace Hopper-named chips would be "the new engine for the world's AI infrastructure" giving a performance “orders of magnitude” greater than its current range of Ampere chips.

"Grace is on track for production next year. [It] moves and processes mountains of data and is ideal for AI infrastructures, scientific computing and Omniverse digital twins," Huang told investors and analysts at Tuesday’s event.

The H100 Grace Hopper superchip is currently in production with availability beginning in the third quarter of 2022 while the Grace GPU is on track for production in 2023.

Overall, Wedbush’s Bryson noted that Nvidia "delivered a comprehensive vision around how they can continue to dominate in markets they control today” and how they could “establish a similar position” in the automotive industry and push into adjacent segments and develop “incremental software revenue streams (that only further lock customers into NVDA's platforms)."

Nvidia will update the market on financial performance for its fiscal first quarter on 25 May.

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