Growing concerns about limited demand and costs associated with AI projects raise questions about the sustainability of Nvidia’s rise, as Broadcom emerges as a prominent competitor in the AI chip market.
Microsoft has a lot of chips and now needs more energy to power them. That was a comment made by Satya NadellaCEO of Microsoft, in a recent interview with the BG2Pod podcast with Brad Gerstner and Bill Gurley.
Microsoft is believed to be one of Nvidia’s largest customers among the tech giants. The microchip firm reported in a filing with the Securities and Exchange Commission (SEC) that sales to a single, anonymous customer accounted for 13% of your total income in the fiscal first quarter of 2025, and UBS analyst Timothy Arcuri said he believes that customer is Microsoft.
Nadella talked about what happened during ChatGPT’s initial AI boom in 2022, when “they bought everywhere” to catch up and prepare for the demand for those AI services. “And that is a one-time thing and now everything has calmed down,” he commented.
Nvidia and its fall
Nvidia stock fell 1.2% on Tuesday after closing in correction territory, defined by many on Wall Street as a drop of 10% or more from a recent high, on Monday. Nvidiah thus falls 11.3% from its 52-week closing high of $148.88 reached on November 7, and 13.7% from an all-time intraday high of $152.89 seen on November 21 , according to data from Dow Jones Market Data.
But Nvidia also experienced a correction this summer and recovered. Shares of the AI chip maker have closed lower in seven of the last eight sessionswith a drop of 4.5% in December, although they still have an increase of 166% so far this year.
Nadella’s interview was highlighted by Doug Kass, founder of hedge fund Seabreeze Partners Management, who told clients in an email note that The abundance of Microsoft chips is not good news for Nvidia, on which it maintains a short position.
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“Apparently everyone was taken by surprise at first; no one wanted to be left behind; They had the money and entered without caution, without worrying about how much they spent or what they spent it on. These were also big projects that are now largely completed,” Kass said, adding that the additional power Microsoft needs won’t be cheap either.
Kass also noted that there are signs that demand is not following some of these projects, such as Microsoft’s Copilot chatbot, which some analysts have also expressed concern about the revenue it would generate. “Even if there was significant final demand for what these projects were selling, chip demand would have to be reduced simply by the mathematics of first receiving a lump sum of projects and then being followed only by what underlying demand allows. Without booming end demand for the end product, I’m not sure how the supply chain can continue to grow without limits. Especially from the levels he’s at,” Kass said.
Source: Ambito
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