NVIDIA Corp CES Fireside Chat Hosted by JPMorgan Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : No, that was a great overview. I appreciate that. I want to -- my first few questions are going to be on some of the things that you just highlighted from the keynote. The first thing is -- and we've heard this from enthusiast-class gamers. Obviously, a very strong lineup of gaming solutions with RTX 50-series announcement. As you mentioned, 50%, 100% better performance versus your 40-series platforms. You start shipping the RTX 50-series in January. Now typically, when you start off a new product cycle with a strong -- you typically do start up a strong product cycle with a strong ramp. But you did call out last earnings that your Gaming business would decline sequentially this quarter on supply constraints. I mean, is this due to the more specialized component requirements of the RTX 50-series platforms or is there some other gating factor to what looks to be the potential for a very, very strong RTX adoption cycle?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Got it. And then, as you mentioned, and something that Jensen and you have brought up a few times, actually doing earnings and last night as well, is agentic AI. Agentic AI, as you mentioned, represents the next generation of artificial intelligence. It enables systems to perform complex tasks autonomously. As Jensen said, perceive, reason, plan, act. And the deployment of agentic AI in sectors like customer service, content creation, software engineering, healthcare, can lead to increased efficiencies, improved outcomes. I mean, NVIDIA blueprints, as you mentioned, plays a crucial role in accelerating the adoption of agentic AI by providing reference workflows tailored to specific use cases. How significant is agentic AI? My assumption is this is very important for enterprise. How important is it in driving higher inferencing adoption and software uptake amongst your enterprise customers?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : That's great. Let's take a step back and let's review calendar '24, right? If you hit your guidance this quarter, revenue for calendar '24 is expected to more than double, much of which is a reflection of the team's strong product cycles combined with the aggressive build-out of GenAI. As we look into calendar '25, consensus has you -- the team up another 50%, 60% revenue growth for your fiscal '26. Help us understand the demand trends and product cycles that will drive your fiscal '26. And how should we think about the team's longer-term revenue growth profile?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : And so that's a good segue. I want to spend a little bit of time on the Data Center business. And with the aggressive annual product cadence within your Data Center business, the manufacturing complexity of these Blackwell-based systems and solutions and just the sheer number of SKUs supported are driving an increasingly supply chain and value chain sort of complexity dynamic. And it's not a surprise. I mean, as you continue to help your customers get to market faster with more system-level solutions, with more SKUs, I would assume there would be challenges given this deployment model. And to that notion, I mean, there have been concerns on the production of GB200 racks driven by potential supply challenges in non-GPU components, across areas such as power management chips or what we call PMICs, or the NVSwitch boards that we hear about, cable cartridges and liquid-to-air sidecars. And so, near term, I mean, are these potential issues impacting the GB200, B100, B200 shipment profile here in Q4 or first half of the year? And how is the team helping to alleviate the supply chain and value chain bottlenecks for your customers?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Yeah. And you brought up a good point, which is -- and we'll get to it in a minute. But there's standing up these very complex compute-based systems with your cloud and hyperscale customers, and the challenges associated with making sure that the data center architecture and infrastructure is in place. And it sounds like, based on your last response, that you are working with your customers and partners very closely here. I know that on the earnings call, the team did talk about demand exceeding your supply capability. Is that still the case? Is supply -- is demand still outstripping supply? What are the particular, let's say, components? Is it [CoLOS]? Is it HBM? Is it other types of components that are -- continue to be in tight supply? And the key question is, when does the team expect a lot of these supply constraints to ease?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Does that -- as your supply capability continues to improve, you continue to unlock that. In a profile where demand is extremely strong, would that imply that the team's Data Center business can grow sequentially every single quarter through this fiscal year, you think?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Your next-generation Blackwell Ultra is set to launch in late '25. And in line with the team's aggressive annual product cadence, help us understand the decision, purchasing dynamics with your customers, given that you'll still be ramping prior-generation Blackwell solution, but at the same time, that you'll be rolling out Blackwell Ultra. How do you, and your customers, and the supply chain, I mean, manage the simultaneous ramp of two product families? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. JANUARY 07, 2025 / 4:00PM, JPM.N - NVIDIA Corp CES Fireside Chat Hosted by JPMorgan

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : There's been -- this is the dynamic that was occurring, and I know you got some questions on this during the earnings call. But there's been some concerns about performance scaling limits on some of these foundational AI models, primarily focused on the potential for diminishing returns on the pretraining phase. One approach here is to augment real-world data with synthetic data. There's also the emergence of new scaling models primarily around post-training optimization and also around inferencing. Jensen talked a little bit about that on the earnings call, this whole notion of test time, compute inferencing. So how does the NVIDIA team think about the continued scaling of models and the requirements for more GPU compute capability going forward?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : We've -- maybe more near term, many of our client conversations focus on the sustainability of demand as we move into calendar '26, i.e., cloud and hyperscaler CapEx spending. And the market is always concerned for the potential that there will be some capacity digestion on new product cycles, all your cloud and hyperscaler customers going to monetize their AI investments. I mean, looking at it from NVIDIA's perspective, obviously, your customers are -- you're in discussion for multiple generations over multiple years. You understand their initiative. So how should we think about the future spending and the potential for things like digestion cycles and so on?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Yeah, we -- one of the things I feel pretty confident about in terms of sustainability of spend is your enterprise-focused customers, vertical markets, maybe sovereign AI. We recently ran a CIO survey with the world's largest global corporations in enterprise. And the survey was insightful in that CIOs, on average, estimated that their current annual spend on AI was about 5% of their total IT spending budgets, but that was expected to grow to 15% to 20% of their budgets in three years. So in dollar spending terms, that's like 50 -- 60% CAGR over the next three years, so a very strong growth profile, clearly implying that this is not a segment that is probably going to take the pedal off the metal any time soon as it relates to spend. So the question here is, what's the anticipated contribution of enterprise vertical markets as a percent of your total Data Center businesses this year? I know last night, for example, Jensen mentioned that automotive vertical within Data Center is already, I think, $2.5 billion, $3 billion in revenues this year. I know Kimberly, Head of your Healthcare, was telling us beginning of last year, healthcare was driving closer to $1 billion per year type run rate. And then additionally, we continue to hear that the majority of all large corporate proprietary data still resides on-prem, and customers want to keep it on-prem, which fits perfectly with your AI enterprise, software suite, and NVIDIA NIM services. So if you can just give us a read on engagement activity level around enterprise, AI, and around NIM. But more importantly, what is the contribution of enterprise, vertical markets, and sovereign as a percent of your total Data Center business this year?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Yeah, absolutely. We've seen, over the past 12 to 18 months, hyperscalers shifting some of their compute from merchant GPUs like NVIDIA to deploying their own custom solutions. And all of your cloud and hyperscalers that are ramping or have plans to ramp their internal solutions over the next several years. How do you view this sort of evolving market? I don't think it's a winner-takes-all scenario. I do think that it's a combination of a mix-and-match approach given your -- the different workloads that your customers have to support or are developing internally. But how does the NVIDIA team think about the emergence and deployment of custom ASICs by some of your customers who, I think, for the foreseeable future, are going to continue to buy a lot of NVIDIA GPUs, but are also going to be developing and purchasing their own custom ASIC solutions?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Let's talk about your networking franchise. Your networking revenues are up 7x, 7x from 2020 when you acquired Mellanox. That's a 70% CAGR. I mean, phenomenal growth obviously led by the team's InfiniBand leadership, but now expanding aggressively into Ethernet networking. You've talked about a multibillion-dollar pipeline in your Spectrum-X Ethernet portfolio. You still have the X800 ramp ahead of you. Can you just give us a rough sense on your networking business mix today, InfiniBand versus Ethernet? And what's the timing of the Quantum/Spectrum-X800 ramp, right? We hear that there's very strong demand for that platform. But it seems like it's one to two quarters behind Blackwell. Wanted to get your sense on timing relative to the Blackwell ramp. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. JANUARY 07, 2025 / 4:00PM, JPM.N - NVIDIA Corp CES Fireside Chat Hosted by JPMorgan

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Yeah. And that's exactly what we hear from your customers as well. It's not just about the compute. In order to develop the best highest performance, most optimized solution, driving the best TCO, it's a combination of optimizing the compute with the networking, with the memory, and the storage, so totally agree with you there. But the last couple of minutes that we have left, I did want to touch on one thing, which is moving over to gaming and consumer side of your business, it's 8% to 10% of your overall business. It's back above $3 billion per quarter. The proliferation of AI at the edge represents a unique opportunity to expand your installed base beyond gaming and into consumer PCs to take advantage of the whole AI PC potential upgrade cycle that's still in front of the industry. How is the team approaching this opportunity? What initiatives are you undertaking to capitalize on it? I know Jensen unveiled and you mentioned the two Project DIGITS last night, for example, which I would call a souped-up AI supercomputing PC. Can the NVIDIA team take Project DIGITS, scale it down to a GPU/ARM-based CPU for AI personal computing form factors optimized to run Windows-based consumer AI applications, and in what time period?

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Great. Well, Colette, I want to thank you for supporting our CES events these past few years. I look forward to continuing to monitor the progress of the team, which looks to be another strong year for NVIDIA. So thank you for all the support, and look forward to a great year from NVIDIA. Thank you very much.