NVIDIA Corp at Morgan Stanley Technology, Media & Telecom Conference Transcript

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

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Anyway, that out of the way. So thank you so much for being here. There's -- we could take three hours, if we had it. But I want to talk about AI, demand drivers, products, supply chain, export controls, and margins, kind of in that sequence. So maybe just starting with demand, you had a really good quarter. You got 18% sequentially in data center for a quarter where the majority of your revenue was Hopper. And Blackwell had been delayed a couple of times in different forms. And it's clearly kind of a higher-ROI product, and you're still selling a lot of Hopper. So it seems to me that that's a pretty strong indication of demand. There's no reason to pull forward products like that. Seems like you have a very strong demand profile. Can you just talk to that? How did you have a quarter like that when Blackwell wasn't yet doing the heavy lifting?

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Great. Thank you. You also made a comment on the earnings call that I thought was really intriguing, that post-training and model conditioning can require orders of magnitude more compute than pre-training. That's a surprising comment to me. I feel like a year ago, we were thinking this market is mostly what we're now calling pre-training. Then you talked about inference being a large portion of revenue. Now you're talking about these kind of post-model training and conditioning, or post-training and conditioning. Can you just talk about what's driving that statement, where that compute demand is coming from?

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Thank you for that. And then the other interesting dynamic is the inference and reasoning models. We're moving to much more complicated tasks on the inference side, so it's clear that the compute goes up. And you guys have sort of talked about the DeepSeek R1 as an indication of that, probably one of the first big reasoning models, and a positive. Obviously, the stock market was -- had some anxiety about that. And I guess maybe you could just talk to the concern of, there's some comments that you can do DeepSeek inference on lower-end hardware, that they can charge very low token prices. Just kind of talk us through why that's a clear positive to you guys, that we're doing reasoning at this level.

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Very helpful. So you shift to talk about products a little bit. Blackwell did $11 billion in the quarter, which was a big number, a bigger number than I thought, certainly. But you've also talked about unprecedented complexity and many different flavors. The different versions and variants are taking time to get out. Can you talk about where we are with that complexity maybe GB200 in particular, we've obviously made some progress. There's general availability in multiple places. What hurdles do you still have going forward on the supply chain here.

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Great. And then you teased out on the earnings call that at GTC, which is just a couple of weeks away now, your developers for them. We'll hear more about Blackwell Ultra. And I feel like you're wrestling with the complexity around the current variant and now we're talking about new variants. Does that occur more complexity? Or are there things you can do to sort of address some of these early issues with some of those new products? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 8:20PM, NVDA.OQ - NVIDIA Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Great. So maybe if we could talk about product in the context of competition. There's been a fair amount of enthusiasm for custom silicon or ASICs, which are right now about 10% of the market and people sort of focus on NVIDIA has got really big numbers, and those are smaller numbers. So those numbers can grow more. My view has kind of been that you can hold that 90% share unless something changes. And what can you do to ensure that you maintain that incumbency benefit that you have? And why is there so much investment in custom silicon from your customers when you're delivering so much performance?

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : I guess they pushback I get on -- and I agree with what you said that the companies are making those investments. So they're investing in customer, they're going to put money into it. And I know Jen-Hsun made a pretty good counterpoint, which is we also invest in alternative foundries, but there's still only one TSMC. Is that kind of the way that you see it.

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Okay. Before we leave product, if we could talk about a couple of non-processor things networking, you were down sequentially and InfiniBand was down and it seemed like you were much more focused on sort of spectrum X going forward, Ethernet. So what do we take away from that? Is there still going to be growth from InfiniBand as you said you're going to grow in networking this quarter, just kind of generally the prospects for your networking business around that.

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Just last part of question. There's a lot of noise out of Taiwan about supply chain moving this way that way. I guess I won't go to the specifics of it, but how should we think about all of that? I mean, it seems to me that the more black well you have, the less Hopper you need to build, there's things like that, that are going on. Just it doesn't seem like anything you're saying about this quarter or the demand in the back half of the year would suggest that there's been any change in trajectory. So just help us interpret those data points.

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Great. I'd like to talk about export controls. Obviously, another anxiety that the market has. Maybe first starting with the Biden AI diffusion rules that were announced in early January. As we sit here today, those are still supposed to go into effect in May. Is that still the working assumption. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 8:20PM, NVDA.OQ - NVIDIA Corp at Morgan Stanley Technology, Media & Telecom Conference And I'm not asking you to predict the unpredictable. But are you -- how are you planning for this? Are you planning as though that's 100% the rule, that's probably the rule. There may be new rules? Just how do you plan in an environment like this.

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : I feel like what you would want here is there's going to be clear restrictions in some regions, and you're going to work to comply with that. I think the risk that I worry about is that you need a license to soother regions where the presumption is yes. And so if everybody -- this is happening very fast from investing very quickly, if you're going to give it to them -- give it to them, don't make us wait six months for a license. Do you think the government can be receptive to that kind of a conversion

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Okay. And then the H20 product, which is purpose-built for the China market, meets the restrictions. If we must have a microphone issue. The -- a lot of focus on that. Does that go away with these reductions? The thing is, it seems to me that product becomes less important over time anyway because there's a threshold of performance and you're just surpassing it by so much that like you've said over and over again, that market is going to be very competitive, a lot of people can compete with you and you have to be x percent below what you're capable of doing. So how important is H20, if that product does get phased out? Does it just give us a sense of the impact that, that could have.

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Okay. Great. So I have two gross margin questions, then I'll open it to the audience, to see if I'm sure there's more. So gross margin was a little worse than people had expected for April and the return to mid-70s maybe takes a little longer. Can you talk about the underlying issues there and maybe some anxiety that it's competitive, something like that? It seems like it's mostly the stuff you've been talking about. But can you just give us a sense of what's been pressure in gross margin?

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Great. And on that mid-70s number, I guess, is this just the normal thing that you get to mid-70s at maturity, you introduce new products and kind of go back to this level? Or -- was there something anomalous about Blackwell where there's more --

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Great. Let me see if we have questions from the audience. I know there's a lot of questions from the audience because they're all e-mailing, said, ask her this, ask her that, but I know that there's -- anyway, we'll keep going. OpEx, your OpEx has come up quite a bit. I know it's hard to keep pace with what your top line has been doing. So how should we think about that? You're spending about a $16 billion run rate on R&D. That's a lot. Again, to me, it mitigates some of the anxiety about competition when I see what you're doing there. But what's going to happen to those spending levels over time?

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : So maybe we could talk about some of the future more growth -- longer-term growth initiatives. Starting with software and services. You've talked about your software revenue stream growing over time. You've also talked about offering various cloud partner -- cloud services in partnership with our cloud customers. Can you talk about the investment in those initiatives and how that's paying off?

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Great. And then some of the longer-term projects around Omniverse, humanoid robots, things like that, I think didn't believe 100% of Jensen's vision a decade ago about AI. So I'm going to listen this time when he talks about these things. But how much are you investing in those projects? And what are the aspirations? These are obviously manifestations of physical AI and things like that? But do you want to build robots. Do you want to be in the business of doing the hardware? Or are you more in an enabling role in that?

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : And given the amount of time it takes the automotive industry to adopt stuff, you might see the technology manifest sooner in other areas.

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : How much of the investment is it going forward? Because I do -- I mean, one of the arguments we get is it is investing as much in R&D. It's hard to overtake them, and you'll see a but they're spending on these other things. Can you just give us a sense for how much of it is going to the green shoots types of projects?

Question: Joseph Moore - Morgan Stanley & Co. LLC - Analyst : Great. So I suspect you've had some large investor meetings today and recently. Can you just talk to -- final question, maybe just catch all. Are there concerns that people have that you think are -- that they shouldn't have? Are there things that people should understand about what NVIDIA is doing in 2025 that maybe people have misconceptions about?