Nvidia stock down despite 'spectacular' earnings report
Susquehanna International Group Senior Equity Analyst of Semiconductors Christopher Rolland joins Yahoo Finance Live to discuss Nvidia stock tumbling despite strong fourth quarter earnings.
Video Transcript
BRIAN CHEUNG: NVIDIA, the chipmaker, reported earnings after the close on Wednesday. You could see shares down right now about 7%. That is despite the fact that they beat fourth quarter estimates on the power of their data center. So let's get a little bit more on this with Christopher Rolland, Susquehanna International Group senior equity analyst of semiconductors. Christopher, great to have you on the show this afternoon. You know, your note that I saw said that these earnings were another beat and raise quarter. So I guess the simple question here is, why is the stock down this morning?
CHRISTOPHER ROLLAND: That's a great question, and we are still searching for answers this morning. You know, if we were to nitpick, perhaps gross margin, the guidance was a tad bit lighter than one would have expected. Additionally, op ex might have been a tad bit more elevated. But other than that, this was a spectacular report.
BRIAN CHEUNG: Christopher, give us a little bit more commentary on what you heard from the company regarding the supply chain issues. This has been not just something within the industry that's been very important, but around the macro economy as well. We heard AMD talk about optimism of the supply chain issues, kind of abating in 2022. Did you hear anything from NVIDIA?
CHRISTOPHER ROLLAND: NVIDIA and AMD, particularly on the GPU side, have been constrained for over a year now. And in fact, if you look at the channel, if you look at adding boards or graphics cards that are in the channel, they trade for premiums above MSRP of about 80%. So NVIDIA and AMD cannot put out enough cards quick enough. And both of these guys have been very vigilant at adding new supply in terms of new contracts, in terms of prepayments.
And if NVIDIA did just that last night, they increased both prepayments and also financed, we believe, the supply chain, certain subcomponents that go into these graphics cards that have been holding up shipments overall. So as we move through '22, we think they will become less constrained. But we would not be surprised, particularly for GPUs, to see this constraint going into next year.
BRIAN CHEUNG: Let's talk about individual lines of revenue here, when we talk about data center, when we talk about automotive. Where are you seeing the points of strength and the points of weaknesses for NVIDIA?
CHRISTOPHER ROLLAND: Yeah, sure. Data center is the area of most attention, investor attention, because it holds the most value. Overall, I would say that it's probably given a 25 or 30 times sales multiple. So it is very important, each incremental dollar to the story here, coming from data center. And data center was exceptional. It was the leader for guidance in terms of the growth edition. And finally, we think next quarter, we're thinking that data center can finally surpass gaming in terms of quarterly revenue. So this is a very big milestone for NVIDIA overall.
For automotive, automotive missed our number. This has been a disappointing sector over the past two years. This is primarily as NVIDIA today is powering computers in cars that do things like consoles or infotainment. And increasingly, they're going to be moving to applications, like [? ADAS ?] or autonomous, which is higher value. But that has yet to hit. But we're fairly confident that their automotive, even though they disappointed, is close or have hit bottom and should inflect in the back half of this year.
BRIAN CHEUNG: Yeah, and their optimism underscored by that partnership they announced with Jaguar and Land Rover, but a lot to watch for in the chip space in the quarters to come. Christopher Rolland, Susquehanna International Group senior equity analyst of semiconductors, thanks so much.
