Comment by reflexe
16 hours ago
According to nvidia’s 2025 annual report [1], 34% of their sales for 2025 comes from just 3 customers.
Additionally, they mentioned that customers can cancel purchases with little to no penalty and notice [2].
This is not unique for hardware companies, but to think that all it takes is just one company to get their sales down by 12% (14b$).
To cut to the point, my guess is that nvidia is not sustainable, and at some point one or more of these big customers won’t be able to keep up with the big orders, which will cause them to miss their earnings and then it will burst. But maybe i’m wrong here.
[1] https://s201.q4cdn.com/141608511/files/doc_financials/2025/a..., page 155: > Sales to direct Customers A, B and C represented 12%, 11% and 11% of total revenue, respectively, for fiscal year 2025.
[2] same, page 116: > Because most of our sales are made on a purchase order basis, our customers can generally cancel, change, or delay product purchase commitments with little notice to us and without penalty.
I have lots of skepticism about everything involved in this, but on this particular point:
It's a bit like TSMC: you couldn't buy space on $latestGen fab because Apple had already bought it all. Many companies would have very much liked to order H200s and weren't able to, as they were all pre-sold to hyperscalers. If one of them stopped buying, it's very likely they could sell to other customers, though there might be more administrative overhead?
Now there are some interesting questions about Nvidia creating demand by investing huge amounts of money in cloud providers that will order nv hardware, but that's a different issue.
Its probably not very likely that if a large buyer pulled out, NVIDIA could just sell to other customers. If a large buyer pulls out, that's a massive signal to everyone else to begin cutting costs as well. The large buyer either knows something everyone else doesn't, or knows something that everyone else has already figured out. Either way, the large buyer pulling out signals "I don't think the overall market is large enough to support this amount of compute at these prices at current interest rates" and everybody is doing the same math too.
None of those customers can afford to cancel their orders. OpenAI, Google and Meta cannot afford to get cheap on GPUs when presumably they believe GAI is around the corner. The first company to achieve GAI will win because at that point all gains will become exponential.
All the AI companies are locked in a death loop where they must spend as much money as possible otherwise everything they invested will immediately become zero. No one is going to pay for an LLM when the competitor has GAI. So it's death loop for everyone that has become involved in this race.