"The world needs more computing." That simple statement by Jen-Hsun Huang last night on the much more upbeat Nvidia (NVDA) call than just a few weeks ago, is the main reason why I think you can believe the company when it calls the bottom here.
But the timeframe? Now that's a different story. Nvidia has called one bottom already that didn't pan out. Has the pig of the inventory in the python finally gotten near the end?
The biggest theme on last night's call is yes, things are about to normalize and they are going to normalize in gaming first and then the data center next. There will be no comeback of crypto and there will be a continuation of anything high powered like artificial intelligence or machine learnings or, of course, autonomously drive cars, where, I think Nvidia is the leader.
Now it is obvious that buyers are champing at the bit to own one of the greatest performers of our lives, yet a stock that has been cut in half by two misses because the company couldn't not forecast how weak their markets really are.
I don't' blame them. Consider the thicket that they had to see through: 1. Chinese gaming, where there had been a definitive slowdown, 2. Crypo-mining vanishing with the cards needed being thrown back into the inventory bin and a totally unpredictable change in pace of data center build out that was supposed to have no economic sensitivity to speak of.
Layer on top of that a difficult transition to the most powerful series of graphic cards yet, the Turing family, and you end up with a transition hole that accentuated the difficulties in an unfathomable way. You just didn't need the power.
So what do they see now? They see data center coming back on line. They see Fortnite and multiplayer free gaming which is great for them. They see Dell (DELL) , HP (HPQ) and Lenovo (LNVGY) picking up the Turing. They see no further slowdown in China because it is a growth economy. And it's been a year since the crypto crash began, the average time for a real bad inventory channel to correct itself.
That's a lot of bottoms to call at once. So why should we believe them really? Simple: because Nvidia is not a cellphone chip maker. It is not a capital equipment company that makes heavy machinery to build cellphone chips. It is NOT a supplier to Apple (AAPL) .
Its cycles are unique, with only Advanced Micro (AMD) a comparable company and AMD pretty much called the bottom, too.
So was it just a pause? A nightmare visited upon a visionary company? No. It is about a company with terrific products but, suddenly, had less growth, no growth or an actual reverse for a host of reasons that they may still be wrong about. But we know they are right about the driving need for more computing. And that, ultimately, is why people will jump the gun and buy the stock without actually having any true idea of a bottom in orders and, more important, a pickup back to the old growth that gave them the highest multiple in the semiconductor industry.