Most synthetic intelligence (AI) fashions are skilled after which deployed in knowledge facilities, that are crammed with hundreds of specialised chips known as graphics processing models (GPUs). Most AI builders haven’t got the monetary assets to construct that infrastructure themselves, however they will hire it from a handful of expertise giants that function a whole lot of centralized knowledge facilities all around the world.
These tech giants usually purchase most of their GPUs from Nvidia (NVDA 1.71%), which provides the very best AI {hardware} within the trade. The chipmaker continues to expertise extra demand than it could fill, which is driving a surge in its income and earnings. In actual fact, Nvidia has added a staggering $3 trillion to its market capitalization because the starting of 2023, and it is now the second most beneficial firm on the earth.
Nonetheless, the truth that solely a handful of corporations can afford to construct the very best AI infrastructure is not a great factor for Nvidia. In the course of the fiscal 2026 first quarter (ended April 27), greater than half of the corporate’s whole income got here from simply 4 unnamed clients, which implies a pullback in AI infrastructure spending from any considered one of them may threaten the chip big’s unimaginable run of progress.
Let’s check out who these prime clients is perhaps, so we will assess the sustainability of Nvidia’s knowledge heart enterprise.
Picture supply: Getty Pictures.
Nvidia’s income is extremely concentrated
Nvidia generated $44.1 billion in whole revenue in the course of the fiscal 2026 first quarter. The information heart phase was liable for $39.1 billion of that determine, so AI GPUs are actually the corporate’s most vital product by far.
Whereas Nvidia would not disclose who its clients are, it does report some knowledge on the focus of its income base. In the course of the first quarter, simply 4 thriller clients alone accounted for 54% of the corporate’s $44.1 billion in gross sales:
|
Buyer |
Proportion of Nvidia’s Q1 Income |
|---|---|
|
Buyer A |
16% |
|
Buyer B |
14% |
|
Buyer C |
13% |
|
Buyer D |
11% |
Knowledge supply: Nvidia.
Which means Buyer A spent round $7 billion with Nvidia in the course of the first quarter, and there are solely a handful of corporations on the earth with sufficient monetary assets to maintain that up. As I discussed earlier, this creates a danger for Nvidia as a result of if Buyer A have been to cut back its capital expenditures, it could be very arduous for the chipmaker to switch that income.
Who’re Nvidia’s thriller clients?
It is unimaginable to determine Nvidia’s prime clients with certainty, however we will make some fairly cheap assumptions based mostly on public forecasts issued by a few of the world’s largest tech corporations:
- Amazon (AMZN 1.81%) stated it should spend round $105 billion on AI knowledge heart infrastructure this calendar yr.
- Microsoft (MSFT 0.67%) stated it’s on observe to spend over $80 billion on AI infrastructure throughout its fiscal yr 2025 (which ends on June 30).
- Alphabet (GOOG 1.07%) (GOOGL 1.05%) plans to spend $75 billion on AI infrastructure this calendar yr.
- Meta Platforms (META 2.77%) says it should spend as much as $72 billion to gas its AI ambitions this yr (a determine it lately elevated from $65 billion).
A number of different AI corporations have smaller — however not insignificant — capital investments within the pipeline. Oracle, for instance, lately informed buyers it should improve its knowledge heart spending to over $25 billion throughout its fiscal yr 2026 (which simply started on June 1). Then there are prime AI start-ups like OpenAI, Anthropic, and Elon Musk’s xAI, which even have very deep pockets.
Whereas all the above corporations are creating AI for their very own functions, Amazon, Microsoft, and Alphabet are additionally three of the world’s largest suppliers of cloud services. In different phrases, they construct the centralized knowledge facilities I discussed earlier, which they hire to AI builders for a revenue.
A possible $1 trillion annual alternative
Regardless of the exorbitant quantity of AI infrastructure spending on the desk this yr, Nvidia CEO Jensen Huang thinks that is just the start. He predicts capital expenditures may prime $1 trillion per yr by 2028, as a result of each new era of AI fashions requires extra computing capability than the final.
For instance, Huang says a few of the latest “reasoning” fashions eat as much as 1,000 times more computing capacity than their predecessors. These fashions spend time “considering” within the background earlier than rendering responses, making certain they produce extra correct info than conventional giant language models (LLMs), which generate quick, one-shot responses.
Nvidia’s Blackwell and Blackwell Extremely GPU architectures have been designed to satisfy the rising demand for inference capability from reasoning fashions, which is why chips just like the GB200 and GB300 are probably the most sought-after on the earth.
If Huang is correct in regards to the trajectory of AI infrastructure spending, then the dangers related to Nvidia’s extremely concentrated income in all probability will not materialize for not less than a number of extra years. Since Nvidia stock is trading at a relatively attractive valuation proper now, these potential dangers in all probability should not preserve buyers from shopping for it proper now.
Suzanne Frey, an govt at Alphabet, is a member of The Motley Idiot’s board of administrators. Randi Zuckerberg, a former director of market growth and spokeswoman for Fb and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of administrators. John Mackey, former CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and quick January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
