Nvidia notched $30 billion in revenue for the second quarter, beating many analysts’ estimates for the interval. Almost half of that got here from 4 prospects, in accordance with an SEC filing from the corporate.
That ought to hold buyers on alert for the subsequent 12 months or two, Gil Luria, a tech analyst who covers Nvidia for D.A. Davidson, an funding agency, advised Enterprise Insider.
In line with the corporate submitting, simply 4 prospects introduced in 46% of Nvidia’s whole Q2 income — about $13.8 billion.
The businesses are saved nameless within the submitting. There is no disclosure regulation that requires Nvidia to disclose its purchasers’ names, Luria advised BI.
However the prospects are more likely to be Microsoft, Meta, Amazon, and Google, Luria stated. All 4 firms are recognized to be ramping up their GPU stockpiles as they aggressively pursue AI initiatives.
“The one approach that they are not the 4 is that if one among their prospects is a reseller,” Luria stated, naming Dell and Supermicro as examples.
An Nvidia spokesperson declined to remark, and not one of the 4 purported prospects responded to requests for remark.
Luria stated it is “extremely uncommon for an organization” at Nvidia’s scale to lean on a handful of purchasers for a big chunk of its income.
“Not one of the different mega caps even have one 10% buyer,” the tech analyst advised BI, referring to giant firms with a market capitalization of greater than $200 billion. As of Wednesday, Nvidia’s market cap was $2.61 trillion.
Luria maintained a Maintain ranking for Nvidia inventory, citing considerations across the sustainability of demand.
Jacob Bourne, a tech analyst for Emarketer, advised BI that the excessive focus of income could also be uncommon inside the context of the broader market. However he stated it is regular for tech firms that present a specialised product, like graphics processing items.
Emarketer is a subsidiary of Axel Springer, which additionally owns BI.
Nvidia stated in a 10-Q submitting that it has skilled durations the place the corporate noticed a big quantity of income from a restricted variety of prospects and that “this pattern could proceed.”
In 2004 — when Nvidia was bringing in a fraction of the income it is seeing at present — the company’s 10-Q filing confirmed that simply 4 unnamed prospects introduced in 51% of its whole income within the third quarter. On the time, Nvidia was working with PC producers like Dell and Sony to supply GPUs for pc and gaming methods.
Luria advised BI that Nvidia has traditionally maintained the identical massive 4 prospects — Microsoft, Meta, Amazon, and Google — in its information heart section. However they’ve usually been balanced by Nvidia’s gaming and auto segments, which have totally different prospects.
“Buyer focus has elevated for NVDIA just lately as a result of the information heart enterprise is now a a lot greater proportion of general income,” Luria stated.
He stated this buyer focus needs to be buyers’ main concern for the subsequent 12 months or two for 3 key causes:
1. Giant firms do not depend on a single supply
Large firms “don’t love being beholden to 1 vendor for any class,” Luria stated.
“Identical to Walmart would not purchase all of its potato chips from one vendor, Microsoft would not like shopping for its pc chips from one firm,” he stated.
Microsoft has made that clear earlier than, Luria added, citing how the corporate step by step moved away from Intel as its sole supplier for processors.
2. The Nvidia demand may very well be short-term
One more reason buyers needs to be involved is that these giant Nvidia prospects have indicated that they’re shopping for extra GPUs with out concern for his or her quick return on funding, Luria stated.
The businesses “have communicated that they’re ‘over-investing,’ which implies they’re shopping for with out regard for a return on funding, normally not one thing that lasts very lengthy,” Luria stated.
Meta CEO Mark Zuckerberg advised shareholders throughout an earnings name in April that any upside to his firm’s AI pursuits will seemingly “take a number of years” — so the present feeding frenzy for Nvidia chips from the big purchasers may very well be short-term.
That does not imply Nvidia will lack prospects.
Bourne, the Emarketer analyst, advised BI that Nvidia has an extended checklist of purchasers, from international locations to startups, that need to purchase the corporate’s chips.
“Simply because at the moment there’s these handful of firms which can be actually making up the lion’s share of Nvidia’s income, it doesn’t suggest that that is at all times going to be the case,” he stated. “We’d see an inflow of latest massive prospects and, in fact, nation-states may very well be amongst these shopping for a big variety of these chips.”
3. Growing competitors
There’s additionally extra competitors coming for Nvidia.
Google and Meta introduced new in-house chips for AI growth earlier this 12 months; Microsoft unveiled its customized AI chips on the finish of 2023; and Amazon is growing its personal chips to keep away from paying for the costly Nvidia GPUs, BI’s Eugene Kim beforehand reported.
“All of those firms are in varied levels of deploying their very own chips for AI,” Luria stated. “Google and Amazon have been doing so the longest which implies their know-how is already aggressive with Nvidia, and Microsoft and Meta are catching up.”
