Graphics specialist NVIDIA (NASDAQ:NVDA) reported strong results for the first quarter of the current fiscal year. The stronger-than-expected results came primarily as a result of "continued strength of Maxwell-based GTX processors," according to NVIDIA CFO Colette Kress on the accompanying earnings call.
Maxwell is the code name for the graphics architecture that the company released back in early 2014 (and built upon during late 2014 and the first half of 2015). However, the company is now transitioning its product lineup from Maxwell to an updated architecture known as Pascal.
Over the last two months, NVIDIA has announced two processors based on the Pascal architecture: GP100 for high-performance computing/datacenter applications and GP104 for high-end desktop gaming systems. Though there has been some speculation that NVIDIA won't ship large quantities of these chips until much later, commentary from management suggests that shipments of these products during the current quarter should be quite robust.
What the CEO had to say
During the call, analyst Deepon Nag asked CEO Jen-Hsun Huang about what kind of revenue contribution management expects from Pascal-based products during the second quarter. Huang didn't give a specific breakdown, but here's what he had to say:
We're expecting a lot of Pascal. Pascal was just announced for [GeForce GTX] 1080 and 1070, and both of those products are in full production. We're in production with Tesla P100, and so all of our Pascal products that we've announced are in full production, so we're expecting a lot.
Given that rumors began to surface that NVIDIA had stopped the production of its previous flagship GPUs last month, it wouldn't shock me to learn that practically all of NVIDIA's high-end gaming GPU shipments during the current quarter will be Pascal-based rather than Maxwell based.
Why NVIDIA can't afford a product shortage
At this stage of the game, NVIDIA has let the proverbial cat out of the bag; NVIDIA's add-in board partners aren't going to want to buy any more older Maxwell-based gaming chips because they know their own customers aren't going to want to buy those old chips after being told how great Pascal is.
This means that NVIDIA needs to deliver, to borrow Huang's words, "a lot of Pascal" in the current quarter and beyond if it wants to continue to sell graphics processors to gamers.
The same likely goes for the company's Tesla high-performance computing accelerators. Given the large boost in performance that the Tesla P100 accelerator brings over the Kepler-based products that it replaces, NVIDIA would risk a pause in Tesla orders if it announced, but wasn't able to ship in any real volume, the Tesla P100.
Fortunately for NVIDIA, Huang made it clear that it is seeing "good" manufacturing yields on the chips that it's trying to build in Taiwan Semiconductor Manufacturing's 16-nanometer manufacturing process.
With yields apparently in solid shape, and with the various new Pascal products now in "full production" according to Huang, it looks as though NVIDIA is well positioned to satisfy the demand that it's likely to see for its new graphics processors in both gaming as well as high-performance computing.