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Now for a closer look at Nvidia's second core results, let's get to DA Davidson Managing Director Gil Luria. Gil, it's good to see you. At least, at least initial reaction here Gil, we're down about 6%, but give us your take Gil. What's your reaction response to the print?

Well, the most important thing is that demand continues to be very strong. Their revenue growth is still spectacular and their their ability to deliver incremental supply even at these huge rates in a timely way is incredibly impressive. The the the little bit of a new story that we have to start thinking about is that the fact that this didn't flow to the bottom line as it has in the past. Much of the enthusiasm about Nvidia has been about thinking about significant upside to earnings estimates going forward, but if the top line beats don't flow to the bottom line as they didn't appear to in this quarter, that raises a new set of questions around whether pricing has changed, whether their input costs are higher, are they hiring and investing in a lot of new things? I think these are new types of questions that are going to get start to get asked today in terms of whether Nvidia can translate the very fast revenue growth to prop to leverage profitability growth.

Gil, how should we be thinking about these Blackwell headlines? Because at one end, I think you could say that the fact that Nvidia is expecting to ship several billion dollars of Blackwell revenue in the fourth quarter here. They're seeing some strong anticipation for the Blackwell chips, but also the fact that they did catch that just a bit saying that they do need to look into the production here of Blackwell chips and and make some changes saying it had to change Blackwell mask production step here. How worrisome is that do you think, or should it be for the investors?

Not very. Their customers don't really care. Their customers, Microsoft, Amazon, Google, Meta, Tesla, are buying the most advanced chips they can get and if it's an H100, H200 or a Blackwell, that's what they'll buy from Nvidia. That's what we're seeing. They'll buy as much as Nvidia is able to produce. Nvidia has accelerated the rate of product introduction and that has really raised the bar on their operational abilities to deliver that. So I don't think we should judge them too harshly. They were on a two-year cycle of a product introduction. They tried to move to a one-year cycle. Maybe that was a little too aggressive, but there's not enough good products from competitors at this supply level that can take away business from Nvidia just because Blackwell's a little delayed.

And we're getting some give some some comments here from CEO Jensen Wong saying Hopper demand remains strong, says the anticipation for Blackwell is incredible. You know, we had some analysts on this week. Um they said, listen, don't complicate the story for Nvidia. To them it's very simple. As long as the hyperscalers, as long as the cloud giants continue to spend, spend, spend on AI, their argument was, you stick with Nvidia. What's your response to that?

That the first part is true, but you got to think about the second part, which is what happens when the hyperscalers feel like they have enough? What happens if compute doesn't continue to to help scale the performance of those foundation models the way it has been. And maybe a quarter or two from now, Microsoft says, you know what? We have enough data center capacity. We're going to slow down spending a little bit.

But is there Gil, is there any what what's the timeline there? Is there any sign that that happening?

No. Not this year. That's not going to happen this year. I would look into next year to wait to hear some of those comments because this year the capex budgets are committed. Again, Microsoft, Amazon, Google, Meta, they know they're going to buy as many GPUs as they can this year, but there will be a quarter, six months from now, nine months from now, where they probably step back and say, you know, we have enough. This isn't an ROI producing investment for us, not anytime soon. This is more gamesmanship to make sure that we have enough of a lead in the arms race. And once they feel like they get to that point, that's the risk to Nvidia is that they say we have enough. We'll pause here.