Mysterious four companies dominate 46% of NVIDIA's revenue - The truth behind the AI chip battle

September 1, 2024

The fiscal second quarter results for the semiconductor design leader NVIDIA for 2024 were announced, revealing the extraordinary fervor in the AI chip market. Amidst the company's doubling of revenue compared to the previous year, it was revealed that just four customers account for 46% of the total.

Led by four companies, NVIDIA achieved $13.8 billion in growth.
NVIDIA's second-quarter revenue reached $30 billion, a 122% increase compared to the same period last year. Behind this rapid growth is the existence of four major customers. These customers accounted for more than 10% of NVIDIA's total revenue and made a total purchase of approximately $13.8 billion.
Due to competitive reasons, the names of these four customers have not been revealed. However, industry experts speculate that they may include major technology companies and AI research institutions such as Amazon, Meta, Microsoft, Alphabet, OpenAI, and Tesla. These companies have a high demand for high-performance AI chips like NVIDIA's H200, which are essential for training and inference processing of large-scale language models.

NVIDIA CEO Jensen Huang claims diversity in demand, but the numbers disclosed by the company actually indicate a high level of concentration. Considering that there were no customers that accounted for more than 10% of sales in the same period last year, this change is significant.

The current status and future prospects of the AI chip market
NVIDIA's rapid growth has brought the company incredible profits. The net margin for the first half of fiscal year 2024 reached 56%, resulting in a profit of $31.5 billion in just six months. This is a dreamlike number for many companies.
However, there are concerns about whether this rapid growth and high profit margin are sustainable. Investors such as Elliott Management and Citadel have raised doubts about the sustainability of this growth. The semiconductor industry is known for its historical boom and bust cycles, and it is uncertain how long the current AI boom will last.

Furthermore, the high dependence on a small number of major customers could be a risk factor for NVIDIA. If the purchasing trends of these customers were to change suddenly, it could have a significant impact on NVIDIA's performance.
On the other hand, the demand for AI chips remains high and NVIDIA is progressing with the development of new products. The company plans to start production of the next-generation architecture 'Blackwell' in the fourth quarter of the fiscal year 2024 and expand it in the fiscal year 2025.
The future development of the AI chip market will be greatly influenced by the speed of technological innovation, changes in regulatory environment, and the strategies of major technology companies. It seems that we will continue to closely monitor the industry trends to see if NVIDIA can maintain its current advantage or if new competitors will emerge.