Nvidia's Q1 Results Were Great, but This AI Stock Could Be a Bigger Winner

Nvidia reported strong Q1 earnings, with revenue up 69% to $44.1 billion and data center revenue surging 73% to $39.1 billion, driven by AI demand; adjusted EPS beat estimates despite a $4.5 billion write-down related to Chinese export restrictions. The company projects Q2 revenue of $45 billion, though this is less than it would have been without the export restrictions. CoreWeave, an AI cloud computing provider and Nvidia customer, also saw significant revenue growth of 420% in its first public quarter, leading to outperformance versus Nvidia in after-hours trading, further solidifying the bull case for AI infrastructure investments.

Analysis

Nvidia's first-quarter results showcased continued dominance in the AI sector, with overall revenue climbing 69% year-over-year to $44.1 billion, exceeding the $43.3 billion estimate, largely propelled by a 73% surge in data center revenue to $39.1 billion. Despite a significant $4.5 billion write-down for H20 chips impacted by Chinese export restrictions, the company maintained a strong adjusted gross margin of 71.3% and reported adjusted earnings per share of $0.81, beating consensus; without the charge, EPS would have been $0.96. Nvidia's second-quarter revenue guidance of $45 billion, although $8 billion lower than potential due to ongoing export controls, was met with positive investor sentiment, evidenced by a 4.9% after-hours stock increase. Concurrently, CoreWeave, an AI-focused cloud computing provider and a key Nvidia customer and investee, demonstrated explosive growth in its first public quarter, with revenue rocketing 420% to $981.6 million. However, CoreWeave's net loss expanded to $314.6 million, influenced by IPO-related costs and a sharp rise in interest expense to $263.8 million, though its adjusted operating income showed underlying business profitability by increasing from $25 million to $162.6 million. CoreWeave, with a $60 billion market cap, outpaced Nvidia in after-hours trading with a 5.6% gain, highlighting its position as a more volatile, highly leveraged play on the AI theme, benefiting directly from Nvidia's ecosystem and sustained AI infrastructure demand.

Key Decisions for Investors

• Investors should acknowledge Nvidia's sustained strong performance and AI market leadership, while carefully considering its $3.3 trillion valuation and the tangible $8 billion quarterly impact of chip export restrictions on future revenue growth.
• CoreWeave presents a high-growth, higher-risk opportunity within the AI infrastructure space; its impressive 420% revenue increase and strategic relationship with Nvidia are compelling, but its widening net losses and substantial interest expenses necessitate thorough risk assessment.
• Consider CoreWeave as a potentially more volatile, but direct, investment in the AI build-out, closely monitoring its progress towards profitability and its ability to manage capital expenditure and debt, especially given its recent IPO and reliance on the broader AI market expansion driven by firms like Nvidia.