Nour EM

Our firm’s back of the napkin math shows that Nvidia’s $NVDA ACIE segment could potentially overtake hyperscalers in two to six quarters. This is an important development as it results in Nvidia’s revenue being more resilient as hyperscalers shift capex toward designing and deploying their own custom chips. ACIE revenue grew faster than hyperscaler revenue last quarter at 138.5% compared to 101.2%, respectively. After reclassifying one company, the QoQ growth for ACIE was 25% compared to hyperscalers at 13%. Depending on how you model the two-quarter lumpiness, ACIE can conservatively overtake hyperscalers in 5-6 quarters at a 14% QoQ growth rate versus 10% QoQ growth rate for hyperscalers, or as soon as 2 quarters if the Q2 pace continues. In early September, Dell $DELL was in agreement with Nvidia’s results, stating that enterprises and neoclouds could contribute half of AI data center capacity growth through 2030, creating a $1 trillion total addressable market (TAM): “We’re expecting AI to be 75% of all data center demand by 2030, adding 200 gigawatts of power over that same time frame. And half of that, we believe, is right in our sweet spot with our customers, the Neoclouds, sovereigns and enterprises. And if you look at that math, we think the opportunity in front of us is more than $1 trillion over that time frame.” Although it may seem counterintuitive for Nvidia, Dell or Super Micro $SMCI to emphasize enterprise and neocloud customers over the hyperscalers and their $1 trillion capex next year, the reason is simple. Unlike the hyperscalers, these customers do not have those budgets to splurge tens of billions on custom chips. Instead, demand is more concentrated in ready-to-deploy servers that can immediately be brought online to generate revenue for immediate ROI, which Dell and Super Micro can do in as little as six hours to one day.

Groq is said to be considering using 3D stacked DRAM in next-gen chip architectures, in a possible shift away from its current SRAM-based designs as SRAM capacity is reportedly increasing just 10-20% every two years. $NVDA $MU $AMD