According to the results of Nvidia's fourth quarter for the 2025 financial year, Microsoft is estimated to be the largest buyer of AI chips, with about 47% of its capital expenditures directly related to AI chips. This estimate accounts for nearly 19% of Nvidia's annual revenue.

Nvidia's stock price peaked at $153 earlier this year but has recently fallen sharply due to investor concerns. As the first quarter results approach, analysts believe that Nvidia's AI chip spending for data center revenues will continue to decline.

Major tech companies are driving Nvidia's AI chip sales.
On Sunday, a Bloomberg report estimated that members of Nvidia's Magnificent Seven group, including Microsoft, Amazon, Meta, Tesla, Alphabet, and Google, are the largest customers of its AI chips. According to the report, Microsoft is the most significant driver of Nvidia's revenues, followed by Amazon, Meta, and Alphabet (GOOG) — the parent company of Google.

25% of Meta's capital expenditures goes to Nvidia, and the company accounts for just over 9% of Nvidia's annual revenue. The report states that the results reflect direct spending on Nvidia. Indirectly, major tech companies support Nvidia; for example, Microsoft spends heavily on renting data center capacity from the cloud provider CoreWeave (CRWV). CoreWeave spends billions on Nvidia's AI chips to operate these data centers.
Microsoft accounted for 72% of CRWV's revenues in the financial results of the last financial year. According to DA Davidson analyst Gil Luria, Nvidia relies on several large tech companies that provide about half of its revenues. He added that revenues have significantly increased in recent years, but this appears to be limiting Nvidia's growth.

According to Nvidia's fourth quarter 2022 earnings report, Microsoft spent less than 1% of its capital on Nvidia and, accordingly, accounted for less than 1% of Nvidia's revenue on an annual basis.

Luria warned that spending may slow down as customers increasingly use in-house developed chips. According to Luria, Nvidia chips have a significant advantage in pre-training AI, and the cost of custom chips is competitive.

Google, Microsoft, Meta, and Amazon have developed custom chips for specific AI workloads, making the chips more efficient for each company's needs.

Microsoft may cut its AI hardware spending.
Competing chip manufacturers, such as Broadcom (AVGO), are developing custom chips for their clients, while Nvidia's GPUs are designed for more general AI computations. Investors have expressed concern about how major tech companies can monetize this technology and profit from their investments. Analysts believe that spending on Nvidia AI chips for data center revenues will continue to decline. According to Bloomberg consensus data, Nvidia's data center revenues are expected to grow by more than 74% to $39 billion in the first quarter of the next financial year's report. In the first quarter of the 2025 financial year, Nvidia's data center revenues increased by 427%.

Microsoft confirmed its spending plan of $80 billion to build AI data centers, with 80% of the spending going to the U.S. Meta raised its spending forecast for 2025, predicting that expenses will fall from $64 billion to $72 billion, compared to the previous range of $60 to $65 billion.

AMD has gained the trust of Nvidia's largest clients with its MI300X GPU AI chip for data centers and plans to supply its MI350 series, which is based on a new architecture called CDNA (Computational DNA). CDNA delivers 35 times the performance of the MI300X, making it a legitimate threat to Nvidia's AI chips.

Nvidia's shares peaked at $153.13 on January 7 but then fell, driven by a series of investor concerns. Investors were worried about the sustainability of demand for AI data centers from hyperscalers after two years of significant investment triggered by the launch of OpenAI's ChatGPT in November 2022.

It is reported that less advanced processors were required to create the Chinese AI model DeepSeek, which threatened Nvidia's sales. Nvidia is trading at 131.29, with a change of 1.16% today.



$BTC, $ETH, $SOL

#Market Rebound, #Cryptomarketnews