Though AI-related investments by cloud giants are a big growth driver right now for Nvidia's (NVDA) server GPU business, they're by no means the only one, its CFO stresses.
Nvidia's stock is up over 7% in Friday trading, and briefly took out its Oct. 2018 high, after the company soundly beat January quarter (fiscal Q4) estimates and -- in spite of cutting its outlook by $100 million to account for coronavirus uncertainty -- shared above-consensus April quarter (fiscal Q1) sales guidance. Nvidia's Data Center segment, which covers sales of server GPUs and Nvidia's GPU-filled DGX servers, saw 43% annual revenue growth and drove the lion's share of the January quarter upside.
Following Nvidia's earnings call, I once more had a chance to talk with CFO Colette Kress. Here's a look at some notable comments that were made, slightly edited for clarity.
On the growth drivers for the Data Center segment, which currently gets about half its revenue from cloud giants (hyperscalers) making large AI-related investments and the other half from "vertical industry" clients using Nvidia GPUs for AI and traditional high-performance computing (HPC) workloads:
"When we look at our results in Data Center, our results [are] broad-based in terms of what we're seeing in terms of strength...We're seeing strong growth in the workloads of [AI] training, we're seeing strong growth in the overall workloads related to...[AI] inferencing.
"We are also seeing an expansion and new growth opportunities in terms of the types of workloads that we are focusing on -- whether that be natural-language processing or understanding, conversational AI and also recommendation engines...These are some of the key workloads that have been driving purchasing behavior. Our cloud instances with our key cloud hyperscalers are [also] a very big area of growth...We're seeing broad-based overall growth in our Data Center [business]."
On Intel's (INTC) recent forecast that its cloud growth will slow following a strong Q1, and whether Nvidia, which expects its Data Center business to grow sequentially in its April quarter, expects something similar:
"It's still early...[that was] an interesting comment from them. They generally give full-year guidance. We generally walk quarter by quarter...but right now, we feel that our overall growth opportunity, our visibility in [fiscal] Q1 is strong."
On how average selling prices (ASPs) are trending for Nvidia's GeForce gaming GPUs:
"We don't give out [specific figures] on GeForce ASPs. What you are seeing, though, over a longer period of time, you continue to see people...buy up the stack."
"GPUs for ray-tracing are now [as cheap as] $299...But remember, they also go up to price points up to $1,000."
"This is also important in terms of our notebook business. The oncoming of overall notebook PCs for [gaming] is a massive new trend...So what that is, is also an opportunity to insert some of our higher-end GPUs into notebooks as we go forward."
On seasonal trends for Nvidia's desktop and notebook gaming GPU businesses:
"Notebook has different seasonality than desktop, primarily because notebooks need a little bit more time for them to go through the production cycle and take that production cycle to both e-tail and retail. [Its] large quarters are generally Q2 and Q3, and Q4 and Q1 are generally lighter."
"You also have a sequential decline from Q4 to Q1 just generally with the overall gaming business, as it leaves the...holiday season."
On how much of an impact a revenue mix shift towards the Data Center segment has had on Nvidia's gross margin, which was better than expected in the January quarter and is also expected to be strong in the April quarter:
"That is the main factor...Mix will always be our largest driver for gross margin. And yes, the higher Data Center revenue for the last couple quarters has been the largest driver."