567: Going Deep in Nvidia Q1, Heico M&A and Q1, Chris Hohn, Apple and China, Google Veo 3, Guitar, Having Kids, Synesthesia, and James Bond Special Effects

"framing alters perception"

You know what's weird? Day by day, nothing seems to change, but pretty soon... everything's different.

—Bill Watterson

🎶🎸 I bought a guitar. A gift to myself 🎁 It was long overdue.

I used to play electric guitar as a teen. Even though I stopped a long time ago, I've had recurring dreams of playing ever since. It never fully left me. I was never good at it, but I missed it.

Whatever you do intensely during your formative years sticks with you for life.

Maybe it’s similar to how I identify as a gamer, even though I rarely play video games anymore 🤔 Apart from rare exceptions, which can be seen on my YouTube channel, where I have videos of me playing a heavily modded and modernized version of old-school Doom.

I generally think people should have more hobbies. No need to take everything seriously, just learn the intro to Metallica’s Battery or the theme song of The Last of Us and vibe for a while…

If you’re curious, I got a Yamaha FSX820C.

Why this one? It's a great value, plus I wanted the smaller ‘concert’ size so that my kids and wife could play more comfortably, and coming from electric, I wanted the cutout so it’s easier to reach the higher frets.

🧠 🟩 🟥 🟨 We just found out that my oldest son has synesthesia, like my wife and I.

If you’re not familiar with synesthesia, I think of it as cross-talk or cross-wiring between sensory regions of the brain. You may perceive a sound that triggers a visual perception, or taste something that “feels” like a geometric shape, or touch something that has a texture that “feels” like a color or a taste.

I know, it’s weird!

My son doesn’t have it for music like I do, but he associates letters, numbers, and days of the week with colors.

However, he has one form of synesthesia my wife and I don’t: he associates letters with being male or female. E.g., “A” is female while “E” is male. I hadn’t heard of that one before! (see, I didn’t write “f.ex.”, I’m making an effort!)

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🏦 💰 Liberty Capital 💳 💴

🐜🔥🚀 Nvidia Q1: Highlights, Blackwell Ramp, and the Next Demand Explosion 🤖🔍🕵️‍♂️

Look at these numbers above ☝️

Almost $40bn dollars in revenue generated in a single quarter for “data center”, a segment that basically didn’t exist 10 years ago. And at EBITDA margins approaching those of Visa and Mastercard 💳

And notice how everything else, which until recently was Nvidia’s entire business, barely moves the needle 🤏

One of the most impressive things about Nvidia's transformation over the past few years is that they scaled up a physical product this fast — which is very different from doing the same with software or a service — and were able to bring along their sprawling supply chain.

When most people think of GPUs, they picture the silicon chip, but there’s a lot more to it than that. What Nvidia sells are complete, integrated systems:

Jensen: Each GB200 NVLink 72 rack contains 1.2 million components and weighs nearly 2 tons. No one has produced supercomputers on this scale. Our partners are doing an extraordinary job. 

I'd love a whole investigative book written just about the logistics and engineering challenges of Nvidia's supply chain and manufacturing ramp-up since 2022 📗🤔

TSMC is getting a lot of time in the spotlight, but there are dozens and dozens of companies operating behind the scenes to make all this happen. The expertise Nvidia has developed and shared with partners, combined with the expertise developed independently to meet Nvidia’s sophisticated needs, is diffusing throughout the ecosystem and creating ripple effects far and wide in a similar way to how Apple and its suppliers helped build a large part of China’s advanced manufacturing ecosystem (more on that later in this Edition).

I’m sure you’ve seen the numbers, so I’ll just give a few:

• Revenue: +69% (*cue Elon giggling*)

• Data center: +73%

• Capital returns: $14.3 billion in buybacks (plus that tiny token dividend)

• Gross margin: 61.0%, (if we exclude the H20 write off because of the China ban, it would have been 71.3%)

• Free cash flow: $26.1bn

• Free cash flow margin: 59.3% (😲)

Let’s dive deep into highlights from the call. First, on the Big Vision front 🔮, intelligence as civilizational infrastructure: