Monday, November 27, 2023

Everyone loves to talk about the potential for artificial intelligence these days. Calcbench decided to take that analysis one step further: how are things going with the microchip companies behind the budding AI revolution? 

This is on our minds because Nvidia Corp. ($NVID), dominant player in the AI microchip market right now, filed its latest quarterly report just before Thanksgiving. Revenue was a stupendous $18.1 billion, up from $13.5 billion the previous quarter and more than triple the $5.9 billion Nvidia reported one year ago.

Impressive, sure. But if you want to see where Nvidia really pulls away from its competitors, you need to look at operating margins. 

Figure 1, below, shows quarterly operating margins for Nvidia and competitors Advanced Micro Devices ($AM), Intel ($INTC), and Qualcomm ($QCOM) for the last two years. Nvidia is in yellow.

Astonishing, isn’t it? One year ago was when ChatGPT and its generative AI brethren took the world by storm — and that’s when demand for Nvidia chips took off. While revenue more than tripled, cost of revenue increased only 71.4 percent ($2.75 billion to $4.72 billion) and operating expenses 15.8 percent ($2.57 billion to $2.98 billion). See Figure 2, below.

With numbers like that, operating margin pretty much had no choice but to soar. Pre-tax income also ballooned, so Nvidia has barrels of money it can spend on dividends, product development, acquisitions, debt repayment (ponder this for a moment: Nvidia has $9.7 billion in total debt, so it could pay off all its debt from the operating income of this quarter alone), or anything else that comes to the executive suite’s mind.

We compiled this research using our Multi-Company Search page for Figure 1, and the Company-in-Detail page for Figure 2. With a few clicks to search for standardized metrics such as revenue and operating income, it took us 10 minutes to make the chart above. 

Equity analysts can do similar in-depth research yourselves, including an easy ability to create charts and tables if you need to drop those into a presentation for the boss. Feel free to experiment yourself if you’re a Calcbench subscriber — or if not, contact us at today for a demo!

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