• Nvidia plans to reveal examples of how its end customers are making money from artificial intelligence chips, Goldman Sachs says.

• The revelation is set to come on Nvidia’s earnings call and could silence AI skeptics.

• Goldman Sachs expects Nvidia to once again beat earnings estimates when it reports in late August.

Nvidia is set to silence AI critics when it reports second-quarter earnings results in late August.

This according to a note on Monday from Goldman Sachswhich details a recent meeting with Nvidia CFO Colette Kress.

There concerns are growing that for all the hundreds of billions of dollars spent on Nvidia’s AI chips, there isn’t much to be seen from it in the way of profits and revenue for Nvidia’s customers.

“End-user companies and their investors will soon be looking for revenue to justify the $500 billion already spent.” the bank of america he said in a note earlier this week. “No one is denying computing power. But after a recent frantic rally around the latest chips, investors may be questioning the near-term financials.”

However, according to Goldman Sachs, Kress said Nvidia planned to highlight the gains its end users are making from the growing use of AI-enabled GPU chips.

“To help investors assess clients’ ROI profiles, Ms. Kress noted that, similar to how data was shared by Meta on their most recent earnings call, they intend to provide ROI metrics ) from customers in its next earnings call, as it targets. to instill confidence in investors,” Goldman Sachs said.

In its latest earnings call, Nvidia said that for every $1 spent on its HGX H200 servers, an API provider serving Meta’s Llama 3 tokens could generate $7 in revenue over four years.

Other takeaways from Goldman’s conversation with Kress include the expected revenue boost from Nvidia’s next-generation Blackwell GPU chips.

Goldman expects Blackwell chip revenue to moderate in Nvidia’s third quarter, “followed by a more significant ramp in FY4Q (January) and FY1Q (April).”

“Ms. Kress also said that inputs such as data center space, power and cooling — all concerns often raised by investors as they relate to customers’ ability to build large-scale data centers — are unlikely to derail growth. the company’s trajectory for the foreseeable future,” Goldman Sachs said.

Overall, Goldman Sachs said it was confident Nvidia would deliver a positive earnings surprise that would lead to positive EPS revisions when it reports results next month.

The story continues

“We reiterate our Buy rating on NVDA as the meeting reinforced our belief in the sustainability of the current Gen AI spending cycle as well as Nvidia’s ability to maintain leadership through consistent and rapid innovation in computing, networking and software,” Goldman Sachs said. .

The bank reiterated a $135 price target on Nvidia, which represents a potential upside of 14% from current levels.

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