Last week, Nvidia Corp. (NASDAQ:NVDA) reported second quarter earnings that exceeded analysts' forecasts. However, the focus shifted to two undisclosed customers who made up a substantial 39% of the company’s revenue.
Referred to as “Customer A” and “Customer B” in Nvidia’s SEC filing, these clients were responsible for 23% and 16% of Nvidia’s Q2 revenue, respectively. This marks a significant rise from the prior year, where they accounted for 14% and 11% respectively.
Despite Nvidia’s stock emerging as the top performer in 2024 and witnessing a 30% surge year-to-date, the concentration of these customers presents potential risks.
Any shift in the purchasing behavior of these two clients could have a significant impact on Nvidia, reports The Fortune.
Last week Nvidia’s CFO, Colette Kress, also disclosed that half of the revenue from its largest segment, the data-center business, is dependent on cloud providers.
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While Nvidia holds over 90% of the AI GPU market, cloud providers such as Google and Amazon are considering alternatives to Nvidia chips.
As per the outlet, Dave Novosel, a senior investment analyst at Gimme Credit, downplayed the risk, emphasizing that the demand for AI progress remains robust and Nvidia’s chips are industry leaders.
He also pointed out that these customers have ample cash reserves and are projected to heavily invest in data centers in the upcoming years.
Nvidia reported a Q2 revenue of $46.74 billion, a 56% increase from the same period last year, and a net income of $26.4 billion, a 59% year-over-year increase.
The company attributed these figures to the continuous construction of AI data centers and the demand for its latest Blackwell chip.
The significant reliance on two customers and the potential shift of cloud providers to alternatives pose a risk to Nvidia’s future performance.
The company’s dominance in the AI GPU market and the continued demand for AI progress may offset these risks.
However, the situation warrants close monitoring, as any significant changes could impact Nvidia’s revenue and market position.
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