Investment Rating - The report maintains a recommendation for Broadcom (AVGO.O) [6] Core Insights - Broadcom reported record revenue of $15.004 billion for FY2025Q2, a year-over-year increase of 20% and a quarter-over-quarter increase of 1%, driven by strong AI semiconductor business and VMware's growth momentum [1][13] - The company expects revenue for FY2025Q3 to be approximately $15.8 billion, representing a year-over-year increase of 21% and a quarter-over-quarter increase of 5%, with AI revenue projected to grow by 60% year-over-year [3][22] Revenue Breakdown - Semiconductor revenue reached $8.4 billion, accounting for 56% of total revenue, with a year-over-year growth of 17% [2][18] - AI semiconductor revenue exceeded $4.4 billion, showing a year-over-year increase of 46%, while non-AI semiconductor revenue was $4 billion, down 5% year-over-year [2][16] - Infrastructure software revenue was $6.6 billion, representing 44% of total revenue, with a year-over-year growth of 25% [2][17] Future Guidance - For FY2025Q3, semiconductor revenue is expected to be $9.1 billion, with AI semiconductor revenue projected at $5.1 billion, reflecting a 60% year-over-year increase [3][22] - The company anticipates continued growth in AI semiconductor revenue into FY2026, driven by demand for custom AI accelerators [4][15] Operational Highlights - The gross margin for FY2025Q2 was 79.4%, exceeding previous guidance, with a year-over-year increase of 3.2 percentage points [1][18] - The company reported an adjusted EBITDA of $10 billion for FY2025Q2, a year-over-year increase of 35% [13][19] Market Position - Broadcom's AI business is supported by three major customers and four potential customers, with expectations for significant deployments of custom AI accelerators by 2027 [4][15] - The launch of the Tomahawk6 switch chip, offering Ethernet switching capacity of 102.4 Tbps, is designed to meet the demands of AI processor clusters [4][14]

Core Insights - The article discusses the recent updates from DeepSeek and NVIDIA's performance, highlighting that NVIDIA's results were better than expected, with significant implications for the AI market and the company's future growth prospects [1][2]. Group 1: DeepSeek and NVIDIA Performance - DeepSeek has updated to version R1-0528, indicating improved reasoning capabilities, but it does not consider this version worthy of being labeled as "R2," suggesting that a true R2 will likely be based on V4 rather than V3 and will require more time for development [1]. - NVIDIA's H20 segment had an overestimation of $1 billion, reducing the total from $5.5 billion to $4.5 billion, as some materials can be reused, which was previously underestimated [1]. - The CFO mentioned that prior to April 9, NVIDIA shipped $4.6 billion worth of H20, but the export ban resulted in a $2.5 billion shortfall in Q1 shipments, leading to a significant capital expenditure gap of nearly $20 billion [1]. Group 2: Revenue and Market Demand - The H20 segment is expected to impact $8 billion in revenue for Q2, but if adjusted, Q2 revenue could exceed $54 billion, indicating strong demand for Blackwell GPUs, which accounted for 70% of DC revenue [1]. - Blackwell GPU revenue is projected to increase from $10 billion in Q1 to $30 billion in Q2, showcasing a rapid transition from H to B cards [1]. - The CEO emphasized a dramatic increase in reasoning demand, citing examples from major companies like Microsoft and Google, and noted that the emergence of agents will further drive this demand [1]. Group 3: Importance of the Chinese Market - The CEO reiterated the significance of the Chinese market, stating that the $50 billion market has effectively closed off U.S. industrial opportunities due to export bans, impacting the Hopper data center business [2]. - The article suggests that regardless of U.S. chip availability, AI development in China continues to progress, raising concerns about whether the largest AI market will operate on U.S. platforms [2]. - The export restrictions are seen as a catalyst for innovation among Chinese chip manufacturers, which could enhance their competitiveness internationally while potentially weakening the U.S. position [2].

Core Viewpoint - NVIDIA CEO Jensen Huang discussed the increasing demand for inference models, emphasizing that these models require greater computational power, which is driving the demand for inference capabilities [1] Group 1 - The need for enhanced computational support is a key factor in the growing demand for inference models [1]

Core Viewpoint - Nvidia is set to release its Q1 FY2026 earnings report, with analysts expecting revenue of $43.3 billion, up from $26 billion year-over-year, and adjusted EPS of $0.88 compared to $0.61 a year ago [1] Group 1: Earnings Expectations - Analysts predict Nvidia's Q1 FY2026 revenue to be $43.3 billion, significantly higher than the previous year's $26 billion [1] - Adjusted EPS is expected to be $0.88, an increase from $0.61 year-over-year [1] Group 2: Impact of H20 Sales Ban - Morgan Stanley notes that the H20 chip sales ban to China will have a significant impact, estimating a revenue loss of approximately $1 billion for Q1 FY2026 and $5 billion for Q2 FY2026 [1][2] - The firm believes that Nvidia lacks a complete substitute for the H20 product and that the likelihood of a quick resolution to the sales ban is low [2] Group 3: Production and Supply Chain Insights - Morgan Stanley has observed improvements in the production issues related to the GB200 rack, with approximately 1,500 units delivered in April, indicating a potential increase in supply [2][3] - The current monthly delivery rate for GB200 racks is at an annualized level of 18,000 units, suggesting that previous pessimistic forecasts regarding production capacity may be overly negative [3] Group 4: Market Demand and Future Growth - There is a strong demand for inference capabilities, with large-scale customers reporting demand exceeding expectations, which is a critical long-term variable for Nvidia [3][4] - Morgan Stanley maintains a positive outlook for Nvidia's growth in the second half of the year, emphasizing that if the company can communicate confidence in supply improvements and demand growth during the earnings call, the stock is likely to perform well [4]