Nvidia is powering the AI revolution, but its biggest customers are looking for ways to rely less on it. Here's why that could matter for investors betting on a $10 trillion future.
Nvidia is powering the AI revolution, but its biggest customers are looking for ways to rely less on it.
Here's why that could matter for investors betting on a $10 trillion future.
Could Nvidia (NVDA +1.38%) become a $10 trillion company?
That's a reasonable question to ask. Nvidia sits at the center of the artificial intelligence boom, supplying the chips and systems that power AI data centers. As a result, its revenue and profits have grown at extraordinary rates as companies race to build AI infrastructure.
But I'd be cautious about assuming the stock can keep delivering spectacular returns. My biggest concern is that Nvidia's largest customers are also becoming its competitors. If they succeed in developing their own AI chips, Nvidia could lose some of its pricing power over time.
That matters because Nvidia needs both growth and pricing power to maintain a substantial share of AI computing spending.
Nvidia's customers want alternatives
Consider Nvidia's biggest customers: Microsoft, Amazon, Alphabet, and Meta.
These technology giants are spending enormous sums building data centers to train and run AI models. To put it into perspective, these four companies are projecting $760 billion in capex this year. Much of that spending benefits Nvidia, which sells the graphics processing units (GPUs) and networking equipment needed to power these facilities.
But buying Nvidia's hardware comes at a massive cost, so unsurprisingly, these companies have strong incentives to find cheaper, more efficient ways to run their AI workloads. One solution is to develop their own chips.
Averytin News Financial update.