Mark Lipacis

Mark Lipacis sought clarification on NVIDIA's revenue diversification, specifically if non-hyperscale customers are growing faster, what differentiates their activities, and if they are expected to become a larger part of the business.

Answer

CFO Colette Kress confirmed that while the top five CSPs account for about 50% of revenue, other diverse customers (AI model makers, enterprises, sovereigns) are a fast-growing area. CEO Jensen Huang added that NVIDIA's CUDA ecosystem, available across all clouds, computer makers, edge, and robotics, enables this diversity. He emphasized partnerships with major AI model makers and the fungibility of the platform, supporting 1.5 million AI models on Hugging Face.

Mark Lipacis sought clarification on NVIDIA's revenue diversification, specifically whether non-hyperscale customers are growing faster, their distinct activities, and the potential for them to become a larger part of the business.

Answer

Colette Kress, EVP and CFO of NVIDIA, confirmed that non-hyperscale customers, including AI model makers, enterprises, and sovereign nations, represent a fast-growing and diverse segment. Jensen Huang, President and CEO, added that NVIDIA's CUDA ecosystem and broad platform availability across clouds, edge, and various industries drive this diversity and growth.

Mark Lipacis of Evercore ISI asked for clarification on enterprise growth within the data center and questioned how hyperscaler spending splits between internal and external workloads, and if enterprises will become a larger part of the mix.

Answer

EVP and CFO Colette Kress confirmed enterprise revenue grew nearly 2x year-over-year, similar to large CSPs. President and CEO Jensen Huang added that while CSPs are currently half of the business, he believes the enterprise segment will be 'by far larger' long-term. He expanded the definition of enterprise to include industrial and physical AI, citing the auto industry's need for AI in design (Agentic AI), manufacturing (AI factories), and the vehicles themselves (robotics), representing vast new markets.

Mark Lipacis asked about the implications of the semiconductor industry potentially reaching $1 trillion in 2026 sooner than expected, specifically whether the historical 15% WFE intensity remains relevant given AI-driven revenue acceleration. He also inquired if this market expansion positions Applied Materials for higher gross margins.

Answer

CEO Gary Dickerson noted that WFE intensity has grown to around 15% but emphasized a new growth framework is needed due to significant divergence in end-market growth rates, with leading-edge foundry logic and DRAM becoming significantly larger. He expressed high confidence in sustaining margin growth by focusing on high-value solutions in these fastest-growing, AI-enabling segments where Applied Materials has strong leadership.

Mark Lipacis posed a big-picture question regarding the WFE intensity, historically around 15% of the semiconductor industry's revenue, and whether this percentage remains relevant given the accelerated path to a $1 trillion industry driven by AI. He followed up by asking if the expansion of AI-driven markets positions Applied Materials for higher gross margins.

Answer

CEO Gary Dickerson explained that WFE intensity has grown to around 15%, but the focus is on outperforming in the largest and fastest-growing markets (leading-edge foundry logic, DRAM, advanced packaging) driven by AI. He stated that the company's strategy of inflection-focused innovation in these high-value segments, combined with platforms like EPIC, will enable value sharing and sustained margin growth.

Mark Lipacis asked about the synergy between GlobalFoundries' recent processor IP acquisitions (MIPS, ARC) and connectivity acquisitions (AMF, InfiniLink), and whether these moves signify a shift up the value chain beyond a traditional foundry. He also inquired about the company's visibility into 2026 compared to a year ago, given customer sentiment on inventory correction.

Answer

CEO Tim Breen explained that photonics acquisitions (AMF, InfiniLink) accelerate technology roadmaps, expand capacity, and bring new customers, creating cross-selling opportunities. He stated that MIPS and Synopsys acquisitions establish a foundation for physical AI, enabling earlier, more strategic customer engagements and moving GlobalFoundries up the value chain by offering IP and software solutions. Regarding visibility, Mr. Breen confirmed significantly more clarity across all end markets compared to a year ago, with very high visibility in data centers, sustained momentum in automotive, and stronger second-half growth expected for IoT due to product transitions. Smart Mobile is expected to track the overall market, with premium handsets showing resilience.

Mark Lipacis asked about the synergy between GlobalFoundries' recent processor-side acquisitions (MIPS, ARC) and connectivity-side acquisitions (AMF, InfiniLink). He also questioned whether these acquisitions signify a move up the value chain, transforming GlobalFoundries beyond a classic foundry. Additionally, he inquired about customer visibility into 2026 compared to a year ago, particularly regarding the supply chain inventory correction.

Answer

Tim Breen (CEO, GlobalFoundries) clarified that photonics acquisitions (AMF, InfiniLink) accelerate technology, capacity, and bring new customers, creating broader synergies. MIPS and Synopsys acquisitions are foundational for physical AI, enabling earlier, more strategic, and durable customer engagements by offering optionality and filling portfolio gaps, thus moving GlobalFoundries up the value chain. Mr. Breen stated that customer visibility into 2026 is significantly higher across all end markets compared to a year ago, with strong visibility into 2027 for data center, good visibility for automotive, and expected stronger growth in H2 2026 for IoT due to product transitions. Smart Mobile, focused on premium handsets, is expected to track the overall market.

Mark Lipacis asked for a framework to understand the impact of tariffs on GlobalFoundries' revenue, manufacturing flexibility, and potential for market share gains. He also inquired about the outlook for Average Selling Prices (ASPs) and the company's strategy to maintain gross margins amid ASP declines.

Answer

CEO Timothy Breen stated that while the medium-term tariff impact is uncertain, the company's diversified global footprint is a long-term tailwind, attracting increased customer interest in U.S. sourcing. He noted that the pricing environment for differentiated technologies remains constructive. CFO John Hollister added that ASPs are expected to decline mid-single digits for the year, primarily due to product mix, not pricing pressure, and that gross margin is supported by utilization, depreciation roll-off, and cost improvements.

Mark Lipacis of Evercore ISI inquired about the drivers of strong 2024 free cash flow, the outlook for 2025 including working capital, and requested more detail on the $935 million impairment charge at the Malta facility.

Answer

CFO John Hollister confirmed expectations for strong free cash flow in 2025, similar to 2024 levels, driven by business performance and a capital-efficient strategy with modest CapEx. He explained the impairment charge was related to rightsizing the Malta fab's carrying value to align with its strategic diversification into new technologies like 22FDX and advanced packaging, which also contributes to the expected 15% decline in D&A.

Mark Lipacis of Evercore ISI noted the company's strong free cash flow generation and asked for more color on its capital allocation strategy, specifically questioning if capital returns like share buybacks or dividends are being considered. He also asked about the target cash balance needed to run the company.

Answer

CFO John Hollister acknowledged the company's strong cash generation, with a net cash position of roughly $2 billion. He confirmed that capital deployment discussions are happening and could include share repurchases, dividends, or debt reduction in the future, but the company needs to build a more consistent history first. CEO Thomas Caulfield added that accretive M&A is another potential use of capital and emphasized that GF's existing factory footprint can support growth to $9-10 billion in revenue while still generating free cash flow.

Mark Lipacis from Evercore ISI asked about the quantified FX impact on future EPS and the rationale for customers to remain with x86 if Arm's data center share reaches 50%.

Answer

CFO Jason Child projected a $0.01 per quarter FX headwind for the rest of the fiscal year. CEO Rene Haas added that Arm's data center share can grow beyond 50% due to the architecture's customization benefits and the efficiency of maintaining a single software stack for AI data centers.

Mark Lipacis from Jefferies asked for clarification on the potential impact of tariffs, questioning if the indirect effect on royalties would stem from negative demand elasticity due to higher end-device costs.

Answer

CEO Rene Haas confirmed this understanding, stating that Arm sees no direct impact as it provides services, not end products. He noted no impact was seen in Q4 or is expected in Q1, but indirect effects on supply chains and end demand create uncertainty for the rest of the year. Haas emphasized strong fundamentals, highlighting the raised Q1 royalty growth guidance of 25% to 30%.

Mark Lipacis asked if CSS license activity is balanced between data center and handsets, and whether AI in smartphones and IoT devices necessitates a chiplet architecture, driving high CSS attach rates.

Answer

CEO Rene Haas confirmed that the chiplet approach will become pervasive across nearly all SoCs, creating a significant opportunity for Arm's CSS solutions. CFO Jason Child clarified that the CSS deals signed to date are split roughly 50-50 between infrastructure (data center) and client (handsets), with automotive adoption expected later.

Mark Lipacis of Evercore ISI requested a framework for understanding the tariff impact on gross margins, specifically its geographic and component-level sources. He also asked about the process for reevaluating the company's target operating model given recent strong performance.

Answer

Executive Guy Kizner explained the tariff impact stems from the bill of materials (BOM) for machines and, more significantly, from service spare parts imported between territories. He noted that with performance outpacing OpEx growth, the company is increasing investments in R&D and sales to support its road map, aligning with the updated operating margin model of 28% to 33% introduced at the recent Investor Day.

Mark Lipacis asked for a perspective on inventory management theory, questioning whether the semiconductor industry has fundamentally changed post-COVID or if it will revert to old restocking cycles driven by lead times.

Answer

CEO Kurt Sievers expressed a somewhat pessimistic view, stating that while communication has improved, he believes not much has fundamentally changed in practice. He fears that working capital pressures across the supply chain are too high to allow for sustained higher inventory levels, making it likely that the industry will revert to its historical, cyclical inventory patterns rather than adopting a new 'just-in-case' model permanently.

Mark Lipacis from Evercore ISI asked about the risk of an AI spending slowdown or digestion period and what metrics Marvell monitors to assess this risk for both its processor and communications businesses.

Answer

Matthew Murphy, Chairman and CEO, explained that Marvell triangulates top-down CapEx data with bottom-up, program-level planning directly with customers. He expressed confidence in a strong multi-year outlook, driven by new custom program ramps and technology transitions that create company-specific tailwinds. He highlighted Marvell's proven ability to scale with customer demand, which underpins this confidence.

Mark Lipacis sought clarification on the $40 billion custom AI TAM and asked about the competitive landscape for custom silicon and the underlying reasons for its growing prominence.

Answer

CEO Matt Murphy confirmed the $40 billion custom TAM and Marvell's goal of capturing over 20% market share. He characterized the competitive landscape as having very high barriers to entry, with only Marvell and one other large competitor possessing the necessary combination of IP, execution teams, and manufacturing scale. He explained the trend is driven by Total Cost of Ownership (TCO), as custom designs allow hyperscalers to optimize performance for their largest, most critical workloads.

Mark Lipacis of Evercore ISI asked about the revenue realization timeline for new products, considering the company has doubled its product introductions over the past two years.

Answer

CEO Vineet Nargolwala detailed the different revenue cycles. In automotive, it typically takes 2-3 years from product introduction to the start of production, with peak revenue occurring 4-5 years out. In industrial markets, the cycle is much shorter, often around 12 months to production. He explained the strategy involves building a core technology platform for automotive and then creating derivatives for industrial customers.

Mark Lipacis from Evercore inquired about inventory levels further downstream at Tier 1 customers and asked for details on Allegro's own on-balance-sheet inventory strategy.

Answer

CEO Vineet Nargolwala described a geographical split in downstream inventory: China and Asia are lean, with some customers potentially "too skinny," while Europe and North America face churn due to OEM production cuts. CFO Derek D'Antilio clarified that Allegro's inventory days decreased due to higher revenue, and the company is strategically building its die bank, which now constitutes about half of its inventory. Nargolwala emphasized this die bank is crucial for ensuring supply agility as the channel becomes leaner.

Mark Lipacis of Evercore ISI inquired about Astera Labs' long-term diversification strategy, asking for the expected revenue split between merchant GPU and custom AI platforms. He also asked about the supply chain mechanics that enabled the company to deliver significant Q3 revenue upside.

Answer

Executive Jitendra Mohan stated that while the company pursues all growth vectors, the custom AI accelerator segment may become a larger portion of revenue over time due to opportunities in back-end interconnects. CFO Michael Tate and Jitendra Mohan explained that the Q3 upside was met by utilizing existing inventory and a flexible, multi-sourced supply chain designed to handle volatile hyperscaler demand.

Mark Lipacis asked for a detailed explanation of what it means for other retailers to be 'piggybacking' on the large North American retailer's rollout, inquiring about the design cycle and the process for these other retailers to 'flip the switch.'

Answer

CEO Chris Diorio explained that the 'piggybacking' is a simple process. The pioneering retailer did the hard work of figuring out how to tag a vast range of general merchandise. Now, other retailers can simply add a 'must be tagged' requirement to their supplier RFQs. For retailers already using RAIN for apparel, the business processes and hardware are in place, making the expansion to new categories a relatively fast process.