Group 1 - The third China International Supply Chain Promotion Expo (Chain Expo) opened on July 16, attracting significant attention with notable participation from companies like Nvidia and domestic startups such as Yushu Technology [1] - The event featured a strong focus on artificial intelligence, with many attendees showing interest in humanoid robots and dexterous hands [1] - On July 17, an advanced manufacturing themed event was held, featuring discussions between Nvidia's CEO Jensen Huang and Alibaba Cloud's founder Wang Jian [2] Group 2 - Jensen Huang highlighted the shift in AI development from human-written code to algorithm-based learning for predicting outcomes, emphasizing the widespread applicability of this approach [4] - Huang noted that the emergence of deep learning around 2012 marked a significant technological breakthrough, leading to advancements in computer vision and speech recognition that surpassed human capabilities [4] - The concept of generative AI, which allows for the translation of information across different formats, has gained momentum since its inception seven years ago, enabling AI to understand and generate information [4][5] Group 3 - Looking ahead, Huang anticipates the next wave of innovation to be "physical AI," integrating AI capabilities into the physical world, particularly in robotics [5] - Huang stated that AI is now capable of solving most cognitive tasks effectively, with generative intelligence rapidly approaching and potentially exceeding human problem-solving abilities [5]

Summary of NVIDIA's Q1 Fiscal 2026 Conference Call Company Overview - **Company**: NVIDIA - **Fiscal Quarter**: Q1 of Fiscal 2026 - **Date of Call**: May 28, 2025 Key Industry Insights - **Data Center Revenue**: Reached $39 billion, a 73% year-on-year growth driven by AI workloads transitioning to inference and AI factory build-outs [2][3] - **Export Controls Impact**: New U.S. export controls on the H20 GPU, specifically designed for the China market, resulted in a $4.5 billion inventory write-down and a loss of $2.5 billion in potential revenue for Q1 [2][13] - **China Market**: The loss of access to the China AI accelerator market, projected to grow to nearly $50 billion, poses a significant risk to NVIDIA's business [2][19] Financial Performance - **Revenue Breakdown**: - Q1 recognized $4.6 billion in H20 revenue before export controls [2] - Anticipated total revenue for Q2 is $45 billion, with a significant decline in China data center revenue expected [11][12] - **Gross Margins**: GAAP gross margin at 60.5%, non-GAAP at 61%. Excluding the $4.5 billion charge, non-GAAP gross margins would have been 71.3% [11] - **Shareholder Returns**: NVIDIA returned a record $14.3 billion to shareholders through share repurchases and dividends [11] Product and Technology Developments - **Blackwell Architecture**: Contributed nearly 70% of data center compute revenue, with significant improvements in manufacturing yields and ramp-up rates [3][4] - **Inference Demand**: Strong demand for inference, with Microsoft processing over 100 trillion tokens in Q1, a five-fold increase year-on-year [4] - **AI Factory Deployments**: Nearly 100 NVIDIA-powered AI factories in operation, doubling year-on-year, with significant growth in GPU usage per factory [5] Strategic Partnerships and Market Position - **Collaborations**: Partnerships with major companies like Microsoft, OpenAI, and Yum Brands to enhance AI capabilities across various sectors [6][10] - **Networking Solutions**: Revenue from networking grew 64% quarter-over-quarter to $5 billion, with significant adoption of Spectrum X among major cloud service providers [7][28] Future Outlook - **Guidance for Q2**: Expected revenue decline in China data center revenue, with a loss of approximately $8 billion in H20 revenue anticipated [11][18] - **Long-term Growth**: NVIDIA's roadmap extends through 2028, with a focus on AI infrastructure, enterprise AI, and industrial AI [4][30] - **AI as Infrastructure**: The company emphasizes the importance of AI as essential infrastructure, similar to electricity and the internet, with a significant build-out expected globally [22][25] Additional Insights - **Export Control Concerns**: The U.S. export restrictions are seen as detrimental to American competitiveness in the global AI market, potentially benefiting foreign competitors [13] - **Emerging AI Technologies**: The introduction of reasoning AI models is driving a surge in inference demand, with significant implications for compute requirements [14][19] - **Investment in Manufacturing**: NVIDIA is investing in onshore manufacturing capabilities to strengthen its supply chain and support AI infrastructure development [15][26] This summary encapsulates the critical points discussed during NVIDIA's Q1 Fiscal 2026 conference call, highlighting the company's performance, strategic direction, and the broader implications for the AI industry.

Investment Rating - The report assigns a strong buy rating for NVIDIA, expecting it to outperform the benchmark index by over 20% in the next six months [36]. Core Insights - NVIDIA reported FY26Q1 revenue of $44.1 billion, a year-over-year increase of 69% and a quarter-over-quarter increase of 12%, significantly exceeding market expectations of $43.3 billion and company guidance of $43 billion ± 2% [3][7]. - The data center business continues to drive growth, with Q1 data center revenue reaching $39.1 billion, up 73% year-over-year and 10% quarter-over-quarter, with Blackwell contributing 70% of data center computing revenue [3][4]. - The company anticipates FY26Q2 revenue to be around $45 billion, considering an estimated loss of $8 billion in H20 revenue due to recent export control restrictions [5][8]. Revenue Breakdown - **Data Center**: FY26Q1 revenue reached a record high of $39.1 billion, with computing revenue at $34.2 billion (up 76% YoY) and networking revenue at $4.957 billion (up 56% YoY) [4]. - **Gaming**: FY26Q1 revenue was $3.763 billion, reflecting a 42% YoY increase and a 48% QoQ increase, driven by strong adoption of Blackwell architecture GPUs [4]. - **Professional Visualization**: FY26Q1 revenue was $509 million, showing a 19% YoY increase, with expectations for recovery in Q2 [4]. - **Automotive and Robotics**: FY26Q1 revenue was $567 million, up 72% YoY, driven by strong demand for autonomous driving and electric vehicles [4]. Profitability Metrics - The GAAP and non-GAAP gross margins for the quarter were 60.5% and 61.0%, respectively. Excluding a $4.5 billion expense, the non-GAAP gross margin would have reached 71.3% [3][7]. - GAAP and non-GAAP diluted earnings per share were $0.76 and $0.81, respectively. Adjusting for the $4.5 billion expense, the non-GAAP diluted EPS would have been $0.96 [3][7]. Future Outlook - The company aims to improve gross margins to the mid-70% range in the second half of the year, with FY26Q2 gross margin guidance set at 71.8% and 72.0% for GAAP and non-GAAP, respectively [5][8]. - NVIDIA is experiencing a significant increase in demand for AI applications, with expectations for AI spending to reach nearly $1 trillion in the coming years [12][17].

Investment Rating - The industry investment rating is "Recommended," indicating an expected increase in the industry index by more than 5% over the next 3-6 months compared to the benchmark index [37]. Core Insights - NVIDIA reported FY26Q1 revenue of $44.1 billion, a year-over-year increase of 69% and a quarter-over-quarter increase of 12%, significantly exceeding market expectations of $43.3 billion and company guidance of $43.0±2 billion. This growth was primarily driven by the data center business, which generated $39.1 billion in revenue, up 73% year-over-year and 10% quarter-over-quarter [3][7]. - The Blackwell architecture contributed approximately 70% of the data center computing revenue, marking the fastest ramp-up in GPU production in the company's history [4]. - The company expects FY26Q2 revenue to be $45.0 billion, with a potential loss of $8.0 billion in revenue due to recent export control restrictions affecting the H20 product line [5][8]. Summary by Sections 1. Performance Overview - FY26Q1 revenue reached $44.1 billion, with data center revenue at $39.1 billion, reflecting a 73% year-over-year growth. The GAAP and non-GAAP gross margins were 60.5% and 61.0%, respectively. Excluding a $4.5 billion expense, the non-GAAP gross margin would have been 71.3% [3][7]. - The diluted earnings per share were $0.76 (GAAP) and $0.81 (non-GAAP), with a potential adjusted non-GAAP EPS of $0.96 when excluding the aforementioned expense [3][7]. 2. Business Segment Performance - **Data Center**: Revenue reached a record high of $39.1 billion, with computing revenue at $34.2 billion (up 76% YoY) and networking revenue at $4.957 billion (up 56% YoY) [4]. - **Gaming**: Revenue was $3.763 billion, showing a 42% year-over-year increase, driven by strong adoption of Blackwell architecture GPUs [4]. - **Professional Visualization**: Revenue was $509 million, with a 19% year-over-year increase, although it remained flat quarter-over-quarter due to tariff-related uncertainties [4]. - **Automotive and Robotics**: Revenue was $567 million, reflecting a 72% year-over-year increase, driven by strong demand for autonomous driving and electric vehicles [4]. 3. Future Guidance - The company anticipates FY26Q2 revenue of $45.0 billion, accounting for an estimated $8.0 billion loss in H20 revenue due to export restrictions. Expected gross margins are projected at 71.8% (GAAP) and 72.0% (non-GAAP) [5][8].

Core Insights - The company reported revenue exceeding expectations, but performance and guidance were impacted by export controls [1] - The company confirmed a significant decline in revenue from the Chinese market, estimating an impact of approximately $8 billion in the upcoming quarters [4][6] - The company is experiencing a surge in AI-related demand, with a projected $20 trillion in AI spending over the coming years [5][6] Group 1: Financial Performance - The company confirmed $4.6 billion in revenue for Q1, with an inability to ship $2.5 billion worth of products, leading to a total expected revenue of $7.1 billion [4] - The company anticipates a significant drop in revenue from Chinese data centers in Q2, with an overall impact of $8 billion on future orders [4][6] - The company’s guidance suggests that non-China business performance may exceed market expectations, driven by growth in AI and enterprise-level solutions [6] Group 2: AI and Technological Advancements - The company is focusing on local deployment of AI solutions, as data access control remains critical for enterprises [5] - The introduction of RTX Pro enterprise AI servers is aimed at facilitating local AI operations, marking the beginning of enterprise-level AI integration [5] - The company is in the early stages of building AI infrastructure, with plans for approximately 100 AI factories currently in development [5][6] Group 3: Export Controls and Market Impact - New export controls have severely limited the company's ability to ship products to China, with the current restrictions making it nearly impossible to utilize the Hopper architecture effectively [7] - The company is assessing a market size of approximately $50 billion that remains unserviceable due to the lack of suitable products for the Chinese market [4][6] - The company plans to engage with the government regarding the new export restrictions when the timing is appropriate [7] Group 4: Networking Solutions - The company has enhanced its Ethernet solutions to improve performance in AI clusters, achieving utilization rates of up to 90% [8] - The introduction of Spectrum-X has seen significant adoption among cloud service providers, contributing to the overall growth in networking solutions [8] - The company’s BlueField platform is designed for high-performance, multi-tenant clusters, catering to the needs of enterprises seeking advanced networking capabilities [8]

Core Viewpoint - NVIDIA's FY26Q1 revenue reached $44.062 billion, representing a year-over-year increase of 69.18% and a quarter-over-quarter increase of 12.03%, exceeding guidance expectations [1][10] Group 1: Financial Performance - FY26Q1 revenue of $44.062 billion surpassed guidance of $43 billion, with a non-GAAP gross margin of 61% and a margin of 71.3% after excluding H20-related expenses [1][10] - The company incurred $4.5 billion in expenses due to H20 product inventory surplus and procurement obligations, which was lower than expected due to the reuse of some materials [1][11] - FY26Q2 revenue guidance is set at $45 billion, reflecting an expected loss of approximately $8 billion in H20 revenue [4][24] Group 2: Business Segments - Data Center revenue reached $39 billion, up 73% year-over-year and 10% quarter-over-quarter, driven by demand for AI applications [3][10] - Gaming and AI PC revenue hit a record $3.8 billion, up 42% year-over-year and 48% quarter-over-quarter, primarily due to Blackwell architecture products [2][18] - Professional Visualization revenue was $509 million, up 19% year-over-year, while Automotive revenue was $567 million, up 72% year-over-year [3][20] Group 3: Market Dynamics - The Chinese AI chip market is estimated at $50 billion, but the H20 export ban has significantly impacted NVIDIA's operations in China [5][25] - The introduction of the GB200 NVL architecture is expected to support large-scale workloads and reduce inference costs [5][12] - The company is expanding its manufacturing capabilities in the U.S., with TSMC building six fabs in Arizona and partnerships with Foxconn for AI supercomputer production [5][28] Group 4: Future Outlook - The company anticipates a recovery in gross margin to 75% by the end of the year, driven by improved profitability from Blackwell products [4][24] - The AI industry is expected to experience exponential growth, with significant demand for inference AI driving the need for increased computational power [40][36] - The company is well-positioned to capitalize on the growing AI infrastructure investments globally, with a focus on local deployments and integration with existing IT systems [32][40]

Core Viewpoint - NVIDIA's Q1 earnings report shows strong performance despite export restrictions, with a 69% revenue increase year-over-year, but anticipates an $8 billion revenue loss in Q2 due to H20 export limitations [1][2][11]. Group 1: Financial Performance - Q1 revenue reached $44 billion, a 69% increase year-over-year, exceeding expectations [11]. - AI data center revenue was $39 billion, reflecting a 73% year-over-year growth [11]. - The company expects a significant decline in Chinese data center revenue in Q2 due to new export restrictions [2][21]. Group 2: Export Restrictions Impact - The new export restrictions resulted in an inability to deliver $2.5 billion in H20 revenue during Q1 [12]. - CEO Jensen Huang emphasized the importance of the Chinese market, stating it is crucial for global AI leadership [2][29]. - The loss of access to the projected $50 billion Chinese AI accelerator market poses a significant risk to future business [2][12]. Group 3: Product Development and Capacity - The Blackwell product line is ramping up production at the fastest rate in company history, contributing nearly 70% to data center revenue [3][12]. - Weekly deployment of approximately 1,000 NVL72 racks (72,000 GPUs) by major customers is expected to increase further [3][12]. - The GB300 system is set to begin mass production by the end of the current quarter [3][12]. Group 4: AI Demand and Infrastructure - There is a significant surge in AI inference demand, with Microsoft processing over 100 trillion tokens in Q1, a fivefold increase year-over-year [4][14]. - The company envisions a future where AI becomes a fundamental infrastructure, similar to electricity and the internet [6][45]. - NVIDIA is actively involved in building AI infrastructure globally, with numerous AI factories under construction [6][45]. Group 5: Strategic Partnerships and Market Position - Huang praised DeepSeek and Qwen as leading open-source AI models, highlighting their strategic value in the AI landscape [5][30]. - The company is committed to maintaining its position as the preferred platform for open-source AI development [30][31]. - NVIDIA's partnerships with major companies and governments are aimed at enhancing AI capabilities and infrastructure [32][33].

Core Insights - The CEO of Nvidia, Jensen Huang, highlighted four unexpected developments in the AI sector [1] Group 1: AI Demand and Developments - Inference AI has created increased computational demand [1] - The cancellation of the AI diffusion policy by former President Trump is viewed positively, with hopes for American competitiveness [1] - In enterprise-level AI, Agentic AI is proving to be more effective than general AI [1] Group 2: Industry Trends - There is a strong regional focus on domestic manufacturing and the construction of new factories, all of which are utilizing AI technology [1]

Financial Data and Key Metrics Changes - NVIDIA reported revenue of $44 billion, a 69% year-over-year increase, exceeding expectations despite a challenging operating environment [6] - Data center revenue reached $39 billion, growing 73% year-on-year [6] - GAAP gross margins were 60.561%, while non-GAAP gross margins would have been 71.3% excluding a $4.5 billion charge related to inventory write-downs [31][33] Business Line Data and Key Metrics Changes - Data center revenue was significantly impacted by new export controls, with $4.6 billion recognized prior to the controls and a $4.5 billion charge for inventory write-downs [7][31] - Gaming revenue reached a record $3.8 billion, increasing 48% sequentially and 42% year-on-year, driven by strong adoption of Blackwell architecture [22][23] - Pro Visualization revenue was flat sequentially at $5.9 billion but up 19% year-on-year [26] - Automotive revenue was $567 million, down 1% sequentially but up 72% year-on-year, driven by self-driving technology and demand for new energy vehicles [28] Market Data and Key Metrics Changes - China data center revenue was slightly below expectations due to export licensing controls, with a meaningful decrease anticipated in Q2 [21][22] - Singapore represented nearly 20% of Q1 build revenue, primarily for US-based customers [22] Company Strategy and Development Direction - NVIDIA is focusing on AI infrastructure, with plans to build AI factories globally, emphasizing the importance of AI in various industries [14][62] - The company is committed to a multi-year product roadmap extending through 2028, with a focus on enhancing AI capabilities and infrastructure [11][12] - NVIDIA is exploring limited options to supply data center products compliant with new export control rules, acknowledging the competitive landscape in AI [9][38] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about losing access to the China AI accelerator market, which could have a material adverse impact on business [9] - The company anticipates continued ramp-up of Blackwell products, partially offset by declines in China revenue, with total revenue expected to be around $45 billion in Q2 [32][33] - Management highlighted the exponential growth in reasoning AI and its implications for future demand and infrastructure needs [62][84] Other Important Information - NVIDIA returned a record $14.3 billion to shareholders through share repurchases and dividends [32] - The company is actively investing in onshore manufacturing and partnerships to strengthen its supply chain [45][46] Q&A Session Summary Question: How much of the inference demand is NVIDIA able to serve? - Jensen Huang stated that NVIDIA aims to serve all inference demand and is on track to do so, highlighting the capabilities of the Grace Blackwell NVLink 72 for reasoning AI [53][54] Question: What is the impact of China on revenue guidance? - Colette Kress clarified that the company recognized $4.6 billion in H20 revenue in Q1 and expects a significant decline in China data center revenue in Q2 due to export controls [60][61] Question: What are the drivers of growth for the AI infrastructure? - Jensen Huang identified four positive surprises driving growth: increased demand for reasoning AI, the rescinding of the AI diffusion rule, the rise of enterprise AI, and the emergence of industrial AI [82][84] Question: Are there more large GPU cluster investments expected? - Jensen Huang confirmed that there are more orders than previously discussed and that many AI factories are being planned globally, indicating a strong future demand for AI infrastructure [70][72] Question: What is the outlook for the networking business? - Jensen Huang highlighted the success of Spectrum X and its adoption among major CSPs, emphasizing the importance of low latency and high performance in AI networking solutions [100]

Group 1 - The core viewpoint is that the AI infrastructure and factory market is in its early stages and is expected to grow from several hundred billion to over 10 trillion USD in the next decade [1] - NVIDIA's CEO Jensen Huang emphasizes the importance of advanced packaging for AI development, stating that current options are limited to CoWoS due to the stagnation of Moore's Law [1] - Huang highlights that NVIDIA is committed to driving the development of advanced packaging technologies, using their own larger chips as an example of how they utilize CoWoS for integration [1] Group 2 - NVIDIA's product planning involves annual upgrades, where improving equipment efficiency can significantly increase data center revenues while reducing costs [2] - The company advises clients to adopt a gradual purchasing strategy to avoid over-investment in outdated technology, ensuring continuous cost reduction [2] - Huang mentions the need for greater manufacturing resilience and diversification globally, with some production remaining in the U.S. while maintaining national security [2]