NVIDIA's financial report reveals concerns over customer concentration, with two major clients contributing nearly 40% of revenue

According to Zhitong Finance APP, American artificial intelligence chip giant NVIDIA (NVDA.US) disclosed in its latest financial report that its revenue is highly concentrated among a few customers. The company's second-quarter filing submitted to the U.S. Securities and Exchange Commission (SEC) on Wednesday shows that only two customers contributed 39% of NVIDIA's total revenue for the July quarter.

Among them, "Customer A" accounted for 23% of total revenue, while "Customer B" accounted for 16%. This proportion is significantly higher than the same period last year, when the top two customers contributed 14% and 11% of sales, respectively. This disclosure has once again sparked market discussions about whether NVIDIA is overly reliant on a few large customers, particularly cloud computing giants like Microsoft, Amazon, Google, and Oracle.

NVIDIA's Chief Financial Officer Colette Kress stated that large cloud service providers account for about 50% of the company's data center revenue. In this quarter, the data center business accounted for 88% of NVIDIA's overall revenue, serving as the core driver of the company's growth. NVIDIA candidly acknowledged in the filing, "We have received significant revenue from a few customers during certain periods, and this trend may continue."

However, NVIDIA did not disclose the specific identities of Customer A and Customer B. It is noteworthy that these two are classified as "direct customers," meaning they are not end-users but companies that purchase chips from NVIDIA, assemble them into systems or circuit boards, and then resell them to data centers, cloud service providers, or end customers. Such direct customers include ODM/OEM manufacturers like Foxconn and Quanta, as well as system integrators or distributors like Dell (DELL.US). Meanwhile, cloud computing companies, internet enterprises, and other corporate customers are classified as "indirect customers," and NVIDIA can only estimate their contributions through orders and internal sales data.

The filing also revealed that two indirect customers each contributed over 10% of total revenue, primarily through purchases from Customer A and Customer B. Additionally, an unnamed "AI research and development company" also contributed significant revenue to NVIDIA through both direct and indirect channels. This has made the customer structure of NVIDIA even more opaque to outsiders.

Analysts generally believe that NVIDIA's growth potential in the future will be closely related to global cloud computing capital expenditures. HSBC analyst Frank Lee pointed out in a research report on Thursday, "Unless the capital expenditure expectations of cloud service providers become clearer by 2026, NVIDIA's short-term profit upside and stock price catalysts are limited." He maintained a "Hold" rating on NVIDIA.

In the face of skepticism, NVIDIA's management emphasized that the company's demand has surpassed traditional cloud service providers. Kress noted in the earnings call that, in addition to cloud computing giants, enterprise users, "new cloud service providers," and "sovereign AI" projects procured by overseas governments are collectively driving the company's growth. This year, NVIDIA expects to record $20 billion in revenue from the sovereign AI sector.

CEO Jensen Huang proposed a more ambitious vision during investor communications: by the end of this century, the global AI infrastructure market is expected to reach $3 to $4 trillion. NVIDIA not only aims to capture about 70% of the cost share in the $50 billion AI data center market but also plans to profit from other chips beyond GPUs. He stated that the capital expenditures of the top four super cloud providers have doubled over the past two years and are expected to reach $600 billion this year, with more enterprises and overseas cloud service providers joining the AI computing power expansion