Combined from CICC research report.
Abstract
The heat of artificial intelligence will continue, and Nvidia's valuation is still at a historical low.
Based on the capital expenditure plans of downstream cloud service providers and the characteristics of semiconductor delivery lead times, it is judged that the company's data center business in 2024 will remain strong, with growth expected quarter by quarter.
Forecast for 2024: Data center growth of more than double, valuation may still be at a historical low
Huge customer demand:
Statistics on the capital expenditure plans of eight major downstream cloud service providers in 2024 are expected to reach $161 billion, a year-on-year increase of 25%.
As a major supplier of accelerator chips, Nvidia will further benefit, with forecasted data center business revenue for Nvidia in 2024 (fiscal year 2025, ending January 2025) expected to reach $96.9 billion, a year-on-year increase of 104%.
Forecasted full-year revenue for 2024 (fiscal year 2025, ending January 2025) is $113.1 billion, an 86% year-on-year increase, higher than the market consensus of $111.2 billion.
Forecasted full-year non-GAAP EPS is $25.04, a 93% year-on-year increase, higher than the Visible Alpha consensus of $22.67.
Forecasted revenue for Nvidia in the next quarter is $251.8 billion, higher than the company's guidance of $240 billion and Visible Alpha's consensus of $244.1 billion.
Although the stock price has risen significantly, earnings have risen even more rapidly, leading to an expected decrease in valuation (data as of the end of February).
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Forecast for 2025: Data center continues to grow by 24%
Summarizing key downstream customer descriptions of capital expenditures, it is believed that cloud service providers' capital expenditures on artificial intelligence will continue to remain high in 2025. The forecasted data center business revenue for Nvidia in 2025 (fiscal year 2026) is $120.3 billion, a 24% year-on-year increase.
The main reasons are:
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Accelerated demand for chips in China may return to the historical range of 20-25%, further solidifying the fundamental demand for artificial intelligence downstream;
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The company's product technology and large model technology still have significant room for improvement. Specifically, Nvidia will launch new products H200 and B200 in the second and fourth quarters of this year, and new large model technologies and applications are constantly being updated, such as Sora, which can currently only generate content for 60 seconds and is not in a multimodal input-output form. There may still be room for product upgrades, and the demand for computing power may be even greater;
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New demands for computing power continue to emerge and will extend into 2025, with increasingly diverse demands. Specifically, more and more cloud service providers are mentioning their determination to invest in artificial intelligence for the long term, and tech companies like Apple continue to lean towards artificial intelligence
Cross-border resources, the demand from various national sovereign institutions and startups may be similar to the demand from cloud service providers. Moreover, during this process, it is believed that the demand for inference will continue to increase, making the demand more sustainable.
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Investment Bank Research: Main Customer Views
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Agreed with the strong demand forecast for 2024, but expressed weak visibility on the acceleration of chip demand in 2025. Investors agree with the forecast for 2024 demand, but lack confidence in the specific demand figures for 2025. Considering that the company's stock price has risen too fast, there is a fear of missing out sentiment. Investors will actively seek other targets related to artificial intelligence computing power and related chips, including server manufacturers, communication chip manufacturers, and other cyclical chip manufacturers.
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Fully agree with the strong demand in 2024 and believe that the demand will remain strong in 2025. Through research on key components of the upstream server industry chain, investors have found that suppliers have been actively stocking up for new products such as B100 in 2025, and there is a supply shortage for H100, H200, and B100 products in 2024. Optimistic forecasts suggest that this year's $25.04 Non-GAAP EPS is still conservative, with a potential 20% upside.
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There are also a few customers who are skeptical, doubting the demand for artificial intelligence acceleration chips in 2024. Their main argument is based on the previous demand cycle for acceleration GPUs in digital currencies, believing that the sustainability of demand is weak, and that the demand from national sovereignty and startups is not genuine demand.
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Investment Logic
The demand for artificial intelligence chips and their upstream and downstream hardware is still the theme of the market this year.
The market's enthusiasm for artificial intelligence will not diminish this year, and the market will focus on the supporting equipment for servers upstream and downstream of NVIDIA. Judging from the recent market reaction to server suppliers such as Dell, the market may still expect insufficient demand for the rapid rise of the entire hardware industry chain driven by artificial intelligence in the short term

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It is expected that the data center will double in size by 2024. Please compile the capital expenditure plans of the eight major cloud service providers for 2024, which are expected to reach $161 billion, a year-on-year increase of 25%

Buy and let go! Securities firm: NVIDIA's stock price in 2024 is safe