Nvidia: The Faith Trade is Over

This is an update of my original Nvidia and AMD deep dive.

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The key takeaway from this earnings report is that tokens are profitable, according to Jensen. This rewrites the entire AI thesis, which for three years has been softened by profitability concerns. The world is therefore now positioned to evolve from 1 billion human users to many billions of agentic users on top, which will drive staggering demand for additional AI compute. There’s no limit to the number of agents that can be deployed profitably and the total value each can produce. This is a historic value unlock, with tremendous implications for the entire AI value chain.

Tokens are now profitable, so model makers are in a race to produce more. In the AI era, compute capacity is revenue and profits.

Jensen Huang, NVIDIA Q1 FY27 Earnings Call

The second takeaway is Physical AI is taking off, with Nvidia’s physical AI revenue crossing $9 billion over the trailing twelve months. This is implicit in the above model, in that many agents will interface with the world via physical devices. This is important for the AMD thesis, because physical AI demands inference at the edge, and AMD's ability to slap an FPGA onto any device delivers exactly that: hyper efficient local inference, optimised at the circuit level for the exact workload it runs. Jensen confirmed the structural logic directly:

There’s no choice but to put the computer where the context is, where the action is. You can’t put that in the cloud. It has to respond reliably, quickly every single time. Can’t imagine a chip plant, a chip fab being connected to a cloud service provider, doesn’t make any sense.

Jensen Huang, NVIDIA Q1 FY27 Earnings Call

This is what I believe sets AMD’s free cash flow per share growth on an Nvidia-like trajectory.

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