Countdown to Nvidia earnings and Arm Holdings setting up an AI chip unit

Nvidia is set to report earnings on May 22nd, with its stock price having risen by 5% in the last month. Analysts predict that AI will grow from 5% to 25% of total chip revenue by 2027, driven by spending from hyperscalers. Nvidia is favored due to its ecosystem control and the launch of its new Blackwell chip. Early estimates suggest Q2 revenue could reach $26 billion, with $23 billion expected from data center revenues. Meanwhile, Arm Holdings is reportedly establishing an AI division and aims to launch an AI chip prototype by 2025, potentially leading to a spinoff of its AI chip business. This move could put Arm in competition with its current customer base, including Nvidia and Apple. However, some analysts remain skeptical about these reports. The impact of Nvidia's earnings on the broader AI sector is also a point of interest, with other tech stocks such as Broadcom, Cadence Design, and AMD awaiting a positive catalyst to boost their performance.

Takeaways

• 📈 Arm Holdings is launching an AI division and plans to develop an AI chip prototype by 2025, potentially spinning off this business.
• 🏭 Arm has already started discussions with foundries to support the development of the new AI chip.
• 🤔 The move to create an AI chip places Arm in direct competition with its current customers, such as Nvidia and Apple, raising concerns among analysts.
• 📊 Nvidia is set to report its earnings on May 22nd, with expectations of significant revenue growth driven by AI chip sales.
• 🚀 Analysts predict Nvidia's total revenue for the April quarter to be around $26 billion, with at least $23 billion from data center revenues.
• 💡 Nvidia remains a favorite in the AI market, controlling the entire ecosystem and planning to launch the new Blackwell chip in the second half of the year.
• 📉 The market is watching Nvidia closely, with stock prices and valuations being revised upward leading up to the earnings report.
• 💬 Despite potential volatility post-earnings, Nvidia is still seen as a core anchor in AI investments.
• 🔍 Other semiconductor stocks like Broadcom, Cadence Design, and AMD have seen stagnant performance and are looking to Nvidia's earnings for a possible boost.
• 🌐 The AI market is still evolving, making it difficult to definitively pick winners and losers, but Nvidia is consistently viewed as a leading contender.

Q & A

What significant move is Arm Holdings making in the AI sector?

Arm Holdings is setting up a new AI division and plans to develop its own AI chips, with a prototype expected by 2025. This marks a major shift in their business model and positions them in direct competition with their current customer base, including companies like NVIDIA and Apple.

When is NVIDIA scheduled to report its earnings?

NVIDIA is scheduled to report its earnings on May 22.

How much is AI expected to contribute to NVIDIA's total chip revenue by 2027?

AI is projected to contribute 25% of NVIDIA's total chip revenue by 2027, up from 5% in 2022.

What are the anticipated revenue figures for NVIDIA for the April quarter according to analysts?

Analysts predict NVIDIA's total revenue for the April quarter to be around $26 billion, with expectations for data center revenues to contribute at least $23 billion.

What could be the potential implications of Arm's move into the AI chip market?

Arm's entry into the AI chip market could lead to a spinoff of their AI chip business and might create tensions with its existing customers, like NVIDIA and Apple, as they would now be direct competitors.

What has been the market's reaction to NVIDIA's performance leading up to the earnings report?

The market has shown optimism about NVIDIA, with the company's share price increasing by about 5% in the last month and analysts revising their estimates upwards.

How does the market view NVIDIA in the context of the AI industry?

The market views NVIDIA as a leading player in the AI industry, often considered one of the few potential winners due to its comprehensive control over the AI ecosystem and the forthcoming launch of its new Blackwell chip.

What is the sentiment among analysts regarding NVIDIA's position before the earnings release?

Analysts remain bullish on NVIDIA, viewing any pullbacks in its stock price as opportunities to buy. The general sentiment is that it's too early to determine the winners and losers in the AI sector, but NVIDIA is favorably viewed.

How might NVIDIA's upcoming earnings impact other companies in the semiconductor industry?

NVIDIA's earnings could significantly influence the broader AI and semiconductor sectors. Positive results might drive increased investment across the industry, whereas disappointing results could shift focus and investment towards other tech sectors like software.

What has been the recent performance of other semiconductor stocks mentioned, and what do they need?

Companies like Broadcom, Cadence Design, and AMD, which peaked in March, have seen stagnant performance in the last 60 days. They are likely looking for positive outcomes from NVIDIA's earnings to boost their own stock performance.

Outlines

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🚀 ARM's AI Division and Chip Development

ARM Holdings is reportedly setting up an AI division and plans to launch an AI chip prototype by 2025. This move would represent a significant shift in ARM's business model and could put them in direct competition with their current customer base, including major tech companies like NVIDIA and Apple. There is skepticism among some analysts about the report, but if true, it could lead to a spinoff of ARM's AI chip business. Meanwhile, NVIDIA's stock price has been rising, and it is expected to continue driving growth in the AI chip market, with Jeffries estimating that AI will account for 25% of total chip revenue by 2027. NVIDIA's control over the ecosystem and the launch of its new Blackwell chip later this year are expected to contribute to its strong position.

Keywords

Nvidia

Nvidia is a leading technology company known for its graphics processing units (GPUs) and artificial intelligence (AI) platforms. In the context of the video, Nvidia is highlighted as a key player in the development and sales of AI chips, with its earnings report anticipated to influence the market significantly.

Arm Holdings

Arm Holdings is a UK-based technology company that designs processor architectures for various applications, including smartphones and IoT devices. The script mentions that Arm is setting up an AI division and plans to launch an AI chip prototype by 2025, which would represent a significant shift in their business model and potentially put them in competition with their current customers.

AI Chips

AI chips are specialized hardware designed to efficiently perform the complex mathematical operations required for artificial intelligence and machine learning tasks. The video discusses the growing importance of AI chips in the technology sector, with companies like Nvidia and Arm Holdings investing in their development.

Prototype

A prototype is an early sample or model of a product that is built to test concepts and feasibility before full-scale production. In the script, Arm's AI chip prototype is mentioned as a future product that could lead to a spinoff of their AI chip business.

Foundries

In the context of the technology industry, foundries are manufacturing facilities that produce semiconductors and other electronic components. The script indicates that Arm has begun talks with foundries to support the production of their new AI chip.

Spinoff

A spinoff in a business context refers to a new company or division created from an existing company, often to focus on a specific product or market. The video suggests that Arm's AI chip development could lead to a spinoff of their AI chip business.

Business Model

A business model outlines how a company operates and generates revenue. The script discusses the potential pivot in Arm's business model towards developing and possibly selling AI chips, which is a departure from their traditional focus on processor architecture licensing.

Competition

Competition refers to the rivalry between companies in the same market. The video highlights the potential competition between Arm and its current customer base, including Nvidia and Apple, if Arm enters the AI chip market.

Analysts

Analysts are experts who study various aspects of the market and provide insights and predictions based on their research. In the script, some analysts are mentioned as being skeptical about the reports of Arm's plans, indicating a level of uncertainty in the market.

Hyper Scalers

Hyper scalers are large companies that operate massive, highly scalable internet services and are known for their significant investment in technology and infrastructure. The video notes that deep budgets and investments from hyper scalers are expected to drive growth in the AI chip market.

Earnings Report

An earnings report is a periodic release by publicly traded companies that details their financial performance over a specific period. The video discusses the anticipation around Nvidia's earnings report and its potential impact on the company's stock price and the broader AI chip market.

Stock Trading

Stock trading refers to the buying and selling of shares in a company on a stock exchange. The script mentions the recent performance of Nvidia's stock and how it is expected to react post-earnings, indicating the market's interest in the company's financial health.

Highlights

Nvidia is set to report earnings on the 22nd of this month, with all eyes on the company's performance.

Arm Holdings is reportedly setting up an AI division and plans to launch an AI chip prototype by 2025.

The new AI chip from Arm could potentially lead to a spinoff of their AI chip business.

There is skepticism among some analysts regarding the report about Arm's AI chip plans.

Nvidia's share price has been on an upward trend, increasing by about 5% in the last month.

Jeffries estimates that AI will account for 25% of total chip revenue by 2027, up from 5% in 2022.

Nvidia's control over the entire ecosystem and the launch of its new Blackwell chip position it as a favorite in the AI market.

Early whisper numbers suggest Nvidia's total revenue for the April quarter could be $26 billion.

At least $23 billion of Nvidia's projected revenue is expected to come specifically from data center revenues.

Analysts are revising their estimates for Nvidia leading up to the earnings report.

Last year, Nvidia's stock price increased by 24% post-earnings, potentially pulling more money into semis.

Adam Parker remains bullish on Nvidia, despite becoming more cautious about mega-cap tech stocks.

Jeffries suggests that pullbacks are a time to reload on Nvidia, as it is too early to determine winners and losers in the AI market.

Nvidia is considered a core anchor in the AI market, with its earnings potentially impacting the rest of the AI halo.

Broadcom, Cadence Design, and AMD, which had their peak in March, are in need of a positive catalyst to resurrect performance.

The effect of Nvidia's earnings on the broader AI market is of particular interest.