Motley Fool Money: Nvidia’s Big Number Released on May 29, 2025

Hosts: Mary Long and Tim Byers
Guests: Tim Byers
Duration: Approximately 19 minutes

1. Introduction and Overview

Mary Long welcomes Tim Byers to the episode, highlighting the packed agenda focusing on Nvidia's recent earnings and ongoing tariff discussions impacting the market.

2. US Court Ruling on Trump’s Tariffs

Mary Long [01:10]:
"Trump's tariffs were issued on the basis of a 1977 law that allows the executive branch to implement commerce controls in the case of a national emergency."

Tim Byers [02:29]:
"...the only real answer here is that it changes nothing until it changes something."

Discussion Highlights:

• The US Court of International Trade ruled that President Trump’s tariffs are effectively illegal.
• Tariffs have dominated news since early April, creating a "time warp."
• Uncertainty remains on whether reciprocal tariffs from other countries will pause following this ruling.
• Potential short-term relief rally in the markets as importers benefit from delayed tariffs.
• Tim Byers [02:50]: "This feels like a relief rally. Like, oh man, the tariffs were not good for a number of companies."

3. Nvidia’s Earnings Report and Free Cash Flow

Mary Long [04:29]:
"Tim, you and I were at Venture X this coworking space yesterday afternoon... the company's free cash flow."

Tim Byers [05:08]:
"At 24 billion a quarter, the company would be on track to deliver 96 billion in organic free cash flow this fiscal year."

Discussion Highlights:

• Nvidia reported $24 billion in free cash flow for the quarter, signaling strong financial performance.
• If sustained, Nvidia could achieve $96 billion in free cash flow annually, nearing the S&P 500 average free cash flow yield of 3.3%.
• The data center business drove a 73% year-over-year revenue increase.
• Tim Byers [06:47]: "If that’s true, this might be a very good year to be an Nvidia shareholder."

4. Nvidia’s Dividend Policy Critique

Mary Long [06:58]:
"What's your gripe with something else within the Nvidia results?"

Tim Byers [06:58]:
"I just don't understand why Nvidia pays a dividend... it's only one cent a quarter."

Discussion Highlights:

• Tim criticizes Nvidia’s minimal dividend payments, arguing they are inconsequential and suggest the company should either pay meaningful dividends or reinvest profits for shareholder growth.
• Tim Byers [07:30]: "Either do it for real or stop."

5. Impact of Export Controls on Nvidia’s H20 Chips

Mary Long [08:41]:
"Nvidia incurred a $4.5 billion charge from excess H2O inventory this past quarter and expects to lose about $8 billion in second-quarter revenue."

Tim Byers [09:42]:
"These chips were effectively optimized for the Chinese market... Maybe it's like $500 million less. Maybe it's immaterial at this point."

Discussion Highlights:

• Nvidia faces significant losses due to the inability to sell H20 chips in China following new export controls.
• Tim suggests that while the immediate financial impact is substantial, there might be potential to recover some value in the future.
• Mary Long [11:05]:
  "Jensen Huang called US chip export controls a failure and emphasized China's importance in the AI market."

6. The Importance of China in AI and Nvidia’s Future Plans

Tim Byers [11:44]:
"China is a fast-growing territory for AI infrastructure, but currently, it's the fourth largest geographical revenue contributor for Nvidia."

Mary Long [17:38]:
"Jensen Huang expects Nvidia to build everything from chips to supercomputers in the US by the end of the year."

Discussion Highlights:

• While China remains a significant market for AI, the US continues to be Nvidia’s largest revenue source.
• Tim is skeptical about Nvidia’s timeline to transition all manufacturing to the US by year-end, labeling Huang’s statement as "hype."
• Potential collaborations with Intel to establish US-based production facilities were discussed.
• Tim Byers [18:50]:
  "He's playing the game... that's probably a reckless prediction."

7. US Commerce Department’s New Export Order

Mary Long [13:05]:
"The Commerce Department orders companies to stop shipping goods to China without proper licenses, specifically targeting EDA software companies like Cadence Design Systems and Synopsys."

Tim Byers [14:06]:
"EDA is critical in designing and verifying chipsets before manufacturing... The administration wants to make it difficult for China to replicate high-performance chipsets."

Discussion Highlights:

• New restrictions prevent companies from exporting EDA software to China without licenses, tightening the US-China tech competition.
• EDA software is vital for designing efficient and reliable chips, integral to maintaining Nvidia’s competitive edge.
• Tim Byers [16:30]:
  "These tools are a critical part of the value chain for developing high-performance chips."

8. Conclusion and Market Implications

Mary Long [19:05]:
"Tim Byers, thanks so much for the time. For helping to demystify so much of the uncertainty and to dig into Nvidia's earnings with us this morning."

Tim Byers [19:17]:
"Thanks, Mary."

Summary Highlights:

• The episode navigates the complexities of recent legal rulings on tariffs and their uncertain impact on the market.
• Nvidia’s impressive free cash flow is a standout performance metric, albeit tempered by challenges in export controls and dividend policies.
• The ongoing tech competition with China remains a critical factor for Nvidia’s strategic planning and market positioning.
• Investors are encouraged to monitor these developments closely as they could influence Nvidia’s stock performance and broader market trends.

Notable Quotes:

• Mary Long [01:10]:
  "Trump's tariffs were issued on the basis of a 1977 law that allows the executive branch to implement commerce controls in the case of a national emergency."

• Tim Byers [05:08]:
  "At 24 billion a quarter, the company would be on track to deliver 96 billion in organic free cash flow this fiscal year."

• Tim Byers [07:30]:
  "Either do it for real or stop."

• Mary Long [08:41]:
  "Nvidia incurred a $4.5 billion charge from excess H2O inventory this past quarter and expects to lose about $8 billion in second-quarter revenue."

• Tim Byers [18:50]:
  "He's playing the game... that's probably a reckless prediction."

This comprehensive discussion provides investors with valuable insights into Nvidia’s financial health, strategic challenges, and the broader geopolitical factors shaping the tech industry. As always, listeners are encouraged to perform their own due diligence before making investment decisions.