Source: Company Financials, Leverage Shares analysis

After Fiscal Year (FY) 2022, there has been explosive change in the largely-orderly shifts in trends. In the present FY:

• Revenue growth outpaces cost of revenue threefold while cost of operations increases a paltry 2%;

• Gross Profit and Net Income have shaken off the slumps seen in the previous FY to exhibit a massive outperformance well exceeding that of revenue-related trends, while the Gross Margin shows a 30% improvement over the previous FY at 73.8%;

• Inventories are only up 2% while a massive pileup in Accounts Receivable pushes current assets to 5-year highs;

• Net Income Per Share (or diluted EPS) has shown the biggest outperformance over all other trends with a nearly 700% markup relative to the previous FY.

The second-order trends, however, indicate how singular this moment is from historical trends. Virtually no single line item shows a sustained growth trend in any way, shape or form.

The company’s products had long been favoured by the gamer and crypto miner. Over the past couple of years, however, the consumer mix has decidedly shifted towards the “corporate”:

• The data center segment registered a 217% first-order change to $47.5 billion, with numerous enterprise solutions in language models, generative AI and medical applications.

• Language models and generative AI are writ large on its next biggest segment – Gaming – which delivered $10.4 billion this year (15% first-order change), with the bulk attributable to increasing inroads with game developers.

• The second-largest first-order change (21%) and the smallest revenue contributor ($1.1 billion) was the automotive segment, with increased adoption by Chinese carmakers Great Wall Motors and Li Auto lying square and center.

The company’s massive boost in earnings, however, doesn’t translate to a massive dividend bonus for long-term investors. With dividends staying at $0.04, the yield is at the 0.02% mark. The company spent $9.5 billion in stock repurchases over the year – nearly identical to the $10 billion spent in the previous FY.

The Mixed: Nvidia isn’t the Most Valued Chip Stock

The semiconductor industry has been a substantial recipient of investor attention over the past couple of years, with “AI” being a dominant theme therein. The performance of a pool of 120 semiconductor/chipmaking-related stocks (which includes the company) depict this in stark terms.