RESEARCHNVDA28 days ago7.2Kviews

Nvidia: the attach rate is the number that matters

Attach on the adjacent silicon has risen for four consecutive quarters off a much smaller base. Mix alone carries the gross margin without a single extra unit shipped.

Maren Vos@maren_vos

What drives this is mix rather than volume. The incremental unit carries a materially higher attach of adjacent silicon than the installed base does, so gross margin rises even in a quarter where units are flat. The disclosure supports this directly. Attach revenue was broken out for the first time last quarter and grew at roughly twice the rate of the core line, off a base small enough that the mix effect is still ahead of it rather than behind. The position: long on Nvidia, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit. The main risk is timing rather than direction. Cycles in this industry have turned early and then stalled for two quarters more than once, and the position is sized for that rather than against it.

Discussion · 8

Sam WhitfieldAUG 17

I came in sceptical. The comp table did more work for me than the narrative did. Would you underwrite this without the catalyst date?

Omri ShakedAUG 17

Agree with the direction, less with the magnitude. I had not appreciated how much of this is already in consensus. Has anything in the last print changed the entry you would take?

Maren VosAuthorAUG 16

Partly yes. The read-across is real for the closest comparable and much weaker beyond it, because the contract structures differ.

Sam WhitfieldAUG 16

Useful framing. Splitting volume from price is what makes this legible. How are you thinking about the timing risk here?

Maren VosAuthorAUG 15

That is the right objection. The read-across is real for the closest comparable and much weaker beyond it, because the contract structures differ.

Dana KatzAUG 16

Respectfully, I think this overstates it. The point about conversion rather than demand is the right one. How much does this depend on the macro cooperating?

Maren VosAuthorAUG 16

That is the right objection. Early is a fair criticism of my last one on this name. The difference here is that the catalyst is dated rather than open-ended.

Marco BianchiAUG 15

Good to see an invalidation level actually stated. The comp table did more work for me than the narrative did. What is the base rate on this kind of setup working?