The Potential Risks of Nvidia's Customer Concentration in the AI Revolution
Nvidia's Customer Concentration Risks Amid AI Boom: What Investors Need to Know
This is the Nvidia statistic that should have optimists doing a double-take.
There is no shortage of reasons why Nvidia could struggle to sustain a market cap in excess of $2 trillion. Just this week I pointed to its historically lofty valuation relative to trailing-12-month sales, as well as the tendency of next-big-thing trends to navigate early-stage bubbles, as viable reasons to be skeptical of Nvidia's surging stock.
Nvidia's Top Customers by Revenue:
- Microsoft: 15%
- Meta Platforms: 13%
- Amazon: 6.2%
- Alphabet: 5.8%
The problem for the infrastructure backbone of the AI movement is that its top customers are actively developing AI chips of their own. This could lead to a significant reduction in Nvidia GPU orders and pose a threat to the company's market position.
The potential peak in orders from major customers in 2024 could signify a downturn for Nvidia's stock as reliance on its GPUs decreases.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.