Story Stocks^®

NVIDIA (NVDA -5%) is trading lower despite reporting a robust Q4 (Jan) beat-and-raise, as investors digest massive gains and weigh sustainability. However, Q1 (Apr) revenue guidance stood out in a big way, easing concerns about any slowdown in AI infrastructure spending. Notably, the Q1 outlook assumes zero Data Center compute revenue from China, making the guidance even more impressive. Management also stated it expects Data Center sequential revenue growth throughout calendar 2026 and indicated it is nearing a partnership agreement with OpenAI.

• Data Center revenue hit a record $62.3 bln, up 22% sequentially and 75% yr/yr, fueled by sustained strength in Blackwell and the Blackwell Ultra ramp. Even Hopper and much of the six-year-old Ampere-based products are sold out in the cloud amid strong infrastructure demand.
• Networking revenue surged more than 3.5x yr/yr to $11.0 bln, reflecting record demand for NVLink, Spectrum-X Ethernet, and InfiniBand scale-up and scale-out technologies.
• Gaming revenue increased 47% yr/yr to $3.7 bln, supported by Blackwell demand and improved supply, although management expects supply constraints to weigh on Q1 and beyond.
• Q1 revenue guidance came in well above expectations and assumes no Data Center compute revenue from China. What was particularly notable was NVDA expecting Data Center revenue to grow sequentially each quarter throughout calendar 2026.
• CEO Jensen Huang struck an emphatic tone, stating that computing demand is growing exponentially as the agentic AI inflection point has arrived. He highlighted skyrocketing enterprise adoption of AI agents and said customers are racing to invest in AI compute. Addressing concerns about hyperscaler CapEx sustainability, management argued that in the AI era, compute directly drives revenue generation, reinforcing confidence in customers' ability to fund ongoing investments.

Briefing.com Analyst Insight:

NVIDIA delivered exactly what the bulls needed to see. The outsized Q1 guidance, particularly with zero assumed China Data Center revenue, along with the expectation for sequential Data Center growth each quarter throughout 2026, should help calm fears that AI infrastructure spending is peaking or that customers are overextending their balance sheets. While supply constraints in Gaming bear watching, the bigger story remains Data Center momentum and the accelerating Blackwell ramp. Perhaps just as significant is management's comment that it is close to a partnership agreement with OpenAI, which could further entrench NVIDIA at the center of the AI ecosystem. Valuation remains frothy, but the fundamental trajectory continues to justify a premium narrative.