Nvidia's Unspoken Problem: 40% of Revenue Comes From Companies Developing Their Own AI Chips

Core Viewpoint - Jensen Huang has established a $4.6 trillion empire through Nvidia, focusing on AI infrastructure, but there are three significant threats to the company's future that are not addressed in earnings calls [1] Group 1: Threats to Nvidia - Threat 1: Major Customers Developing In-House Chips Microsoft, Meta, Amazon, and Alphabet account for 40-50% of Nvidia's revenue and are all creating custom AI chips, which could replace Nvidia's offerings. Inference workloads, which represent 80% of long-term AI compute, are at risk if these companies build their own chips [2][3] - Threat 2: AMD as a Competitive Alternative AMD's MI300X chips have gained traction, offering competitive performance at 20-30% lower costs compared to Nvidia. Microsoft Azure and Oracle Cloud are adopting AMD technology, and OpenAI is reportedly testing AMD chips to reduce dependency on Nvidia [4][5][6] - Threat 3: Geopolitical Risks from China China's approval of H200 chips may seem positive, but it poses a risk as the country has a history of extracting technology and then developing domestic alternatives. If Nvidia becomes too reliant on the Chinese market, future bans could severely impact revenue [7][8] Group 2: Nvidia's Strategic Omissions - Lack of Discussion on Customer Developments Jensen Huang focuses on AI demand and partnerships in earnings calls but avoids discussing customer chip development, AMD's market share, and the implications of inference versus training margins [9][10] - Market Realities Ignored The optimistic view assumes AI growth benefits all players, while the pessimistic view recognizes that customers are building their own solutions, AMD is providing cheaper options, and geopolitical tensions could threaten Nvidia's market position [10]