Nvidia reported this afternoon.

As we’ve discussed, the growth in data center revenue has been on a rhythm of about $4 billion a quarter since the second half of 2023.

For Q1, data center revenue grew by $3.5 billion.  That’s the weakest quarterly growth since Jensen Huang declared the technology revolution was underway two years ago in his May earnings call.

So, this is the lowest quarterly growth in data center despite what is broadly known to be insatiable demand for Nvidia’s GPUs.

Also, margins came in dramatically lower.  Gross margins fell from 73% to 61%.  And net income margin fell from the mid-50s (percent) to 43%.

And (directly related to that margin hit) they spent a lot of time on the call talking about billions of dollars of charge-offs due to restrictions on chip trade with China. 

All of this, yet the stock went up, in after-hours trading. 

Why?

As we’ve discussed over the past several quarters, the Nvidia’s supplier, Taiwan Semiconductor, seems to have hit capacity.  And it seems clear that Nvidia can’t chip away at the backlog of demand until new global capacity comes online (which will be in the U.S., next year). 

But, the data center revenue growth in Q1 was fueled by networking equipment and inferencing.  Both had explosive growth in the quarter, and it’s expected to continue.