Gene Munster

Gene Munster

If you missed Google I/O this week because it got buried under NVIDIA earnings, SpaceX S-1, and OpenAI verdict, you’re not alone.

All you need to know is $Alphabet - C(GOOG.US) Search is continuing to evolve. They’ll be adding agents into basic search, that means in the future Search will working for you even when you’re not searching.

Second, custom silicon is lower costs and increasing Cloud market share.

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I have a bad habit of trying to guess what a stock will do the day after earnings.

It's a bad habit because post-earnings trading has so much noise, it tells us almost nothing about the actual fundamentals.

Now that the disclaimers are out of the way: I expect $NVIDIA(NVDA.US) to be up 1-2% today. It’s currently down 0.4% in the premarket (8:15a ET).

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$NVIDIA(NVDA.US) call just ended. Stock drifted down an additional 1% in the final minutes (now down 1.5%) as investors were hoping for some new nugget on growth.

The $20B CPU nugget just wasn't enough.

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Question from the call: Does the $20B in CPU guide (that’s Vera) this year cannibalize GPU revenue?

Jensen says no, and the way to think about this is they’re building out a computing platform and don’t think about CPU vs GPU, just more compute.

My take: Makes sense.

Source: Gene Munster

Physical AI & $NVIDIA(NVDA.US)

As in each of the past five quarters, Jensen reminds investors that physical AI will become a major driver in the next several years, but it has not yet started.

My take: Investors are under appreciating the impact of physical AI. This year, FSD will account for about 0.3% of total passenger miles driven in the U.S., and autonomous ride-hailing will account for about 2% of rideshare. Cars are one part of physical AI.

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Jensen says "they should grow faster than hyperscaler capex"

My take: This year, those hyperscalers are expecting to grow capex at around 80%. That means Jensen thinks they'll grow more like at 90% this year (CY26). The Street is at 72% growth for $NVIDIA(NVDA.US) this year.

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Jensen keeps talking about Anthropic.

My take: Anthropic's business continues to be on fire, and for the first time meaningfully moving the growth needle for $NVIDIA(NVDA.US)

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Jensen says they will be supply constrained for the life of Vera Rubin. Shipments started in March.

My take: that’s a positive, because it opens the door that demand is actually better than what we see. $NVIDIA(NVDA.US) shares had little reaction to the comment.

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Colette Kress only comment in prepared remarks on China is that they got approval and they're not expecting any revenue in July.

* Best case is China could account for 10% of sales.

* More likely case is it adds back 5%.

* That said, investors will back it out given its risky revenue.

My take: China doesn't matter.

Source: Gene Munster

Hyperscaler revenue was essentially half of Data Center $NVIDIA(NVDA.US) overall revenue. My math is that’s consistent with the Jan 26’ quarter.

My take: GOOG, MSFT, META and AMZN capex guide is still the easiest way to get a sense of how things are going to Nvidia.

Source: Gene Munster

CFO says they have sight to $20B of CPU revenue this year. That means it will be about 5% of revenue from basically zero last year.

My take: The CPU story is nice but doesn't move the needle. $NVIDIA(NVDA.US)

Source: Gene Munster

To get a better sense about the underlying $NVIDIA(NVDA.US) revenue growth, we need to adjusting for China revenue over the past two quarters. Here's what we find.

Jan 26: 89%

Apr 26: 109%

Jul 26: 95%

Guidance for July doesn't need an adjustment (there was no China revenue in July 25').

Take away: Keeping growth rates at similar rates despite the law of large numbers is a sign we're still early. These numbers are so good that it makes Apple's beating the law of large numbers in the sweet spot of the iPhone growth look JV.

Source: Gene Munster

Getting ready for $NVIDIA(NVDA.US).

➡️ Numbers will be great.

➡️Outlook will be better.

➡️ Thats likely priced into shares because fears about slowdown next year will remain.

➡️More importantly, if they keep CY26 revenue at 72% (Street) or better, the AI trade is intact.

➡️In March at GTC, Jensen gave the $1T cumulative revenue by end of CY27, which implies 40% plus growth for CY27. The Street is at 34%. I expect the Street to land around 40% growth following earnings tonight.

➡️China doesn’t matter. If it turns back on, investors will likely back it out because they fear it will go away again.

More to come.

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Shares of $NVIDIA(NVDA.US) will finish the week up ~15%, compared to the Nasdaq up ~10%, given newfound confidence in the China opportunity. I've come to the conclusion that China doesn't matter because it's unpredictable and Nvidia is doing just fine without it.

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T-minus 7 days until $NVIDIA(NVDA.US) reports. The numbers are going ~10% higher. I'm expecting shares to have a muted response because investors will likely still be worried about next year.

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AI impact on jobs update: ADP Private payrolls rose by 109k in April vs expectations of 84k and 61k in March.

While this may suggest AI is not impacting jobs, a closer look shows job growth coming from areas where the human touch matters, education and health (added 61k), trade and transportation (added 25k) and construction (added 10k).

Those knowledge workers (including myself) are still at a fork in the road: embrace the tools or risk being replaced.

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Last night Anthropic announced a multi year $200B commitment to $Alphabet - C(GOOG.US) Cloud.

The debate about can Anthropic make good on the deal misses the point.

The big picture is this announcement underscores how early we are in AI, with the need for compute taking off on the heels of last Novembers step function improvement in many of the models utility.

That’s good news for the entire AI model and infrastructure stack.

Source: Gene Munster

$Meta Platforms(META.US) getting more into physical AI (aside from smart glasses). They just acquired Assured Robot Intelligence to build humanoid robots. No terms given. My guess is they paid sub $5B.

Big Tech (TSLA, GOOG, AMZN) appears all-in on robotics,and they'll be purchasing gear from smaller companies to build that future. My Innovator Deepwater Frontier Tech ETF ($Innovator Deepwater Frontier Tech ETF(LOUP.US)) has a focus on smaller, high-conviction companies enabling the AI and robotics transformation.

To view LOUP’s holdings:

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Cooks says if they get a tariff refund, which I estimate would be close to $5B, they would reinvest it into the US.

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John says "AI is an important investment area and we will be doing that on top of our other investment efforts".

My take: They're going to be spending more on AI. We don't know how much more. $Apple(AAPL.US)

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Question comes up on why the iPhone 17 has been so strong. Cook calls it "amazing" across the world.

Cooks says they set a new record for upgraders, which underscores some of what we are seeing in these strong numbers is the benefit of that 39% iPhone growth spike in FY21.

Source: Gene Munster

More on the constraints. Cook says the availability of advanced modes in System on Chips (SoCs), not memory.

The majority is on the Mac mini, Mac Studio and Mac Neo. Those products collectively account for about 3% of revenue.

The bottom line is if not for the supply on the Mac, the guide would have been higher, by likely 1% or at most 2%. It's small and a positive. $Apple(AAPL.US)

Source: Gene Munster

$Apple(AAPL.US) June revenue growth target of 14-17% vs. Street at 9%. Cook says Mac will be constrained in June which means the real growth is slightly better.

Source: Gene Munster

$Apple(AAPL.US) up 4% does not reflect how good the guide was. In a vacuum, I would have expected the stock to be up closer to 10% on that guide.

I believe the reason is investors are thinking about what's after this super cycle.

The answer is growth will move back to 5-10%, but all of the goodness of growth over the past few quarters lays the groundwork for the next super cycle likely in three years. Yes, that's a long ways out, but it's a carrot on the horizon that's here to stay.

Source: Gene Munster

CFO says capital returns remains important to long term shareholder value. He also said, the needs of the business come before capital returns.

Source: Gene Munster