Total Sales Up 13%, Largest Client MS
"We Have Many Chips," Statement
"Microsoft (MS) has many (AI) chips."
Satya Nadella MS CEO
Satya Nadella, CEO of MS, one of Nvidia's largest customers, said that there are enough artificial intelligence (AI) chips, raising concerns on Wall Street and beyond about a slowdown in demand for Nvidia's chips. Nvidia's stock price also entered a correction phase, falling for four consecutive trading days.
According to MarketWatch on the 17th (local time), Nadella said in a recent interview on the podcast ‘BG2Pod’ with entrepreneurs Brad Gerstner and Bill Gurley, "AI power is needed a lot, but chip supply is not constrained." He diagnosed that while many companies rushed to expand investments during the AI boom triggered by ChatGPT in early 2022, that is no longer the case. He added, "At that time, to keep up with AI service demand, chips were bought here and there," but "it was a one-time event, and now everyone has caught up."
These remarks have immediately led to analyses suggesting a slowdown in demand for Nvidia AI chips. It is assessed that as competition among companies in AI development eases somewhat, AI chip orders will not increase as much as before. MS is one of the largest customers, accounting for 13% of Nvidia's total sales (based on the first quarter of fiscal year 2025).
Doug Kass, founder of hedge fund Seabreeze Partners Management, emphasized in an investor memo that "MS's abundant chips are not good news for Nvidia." He explained, "They poured money in without concern because they did not want to fall behind," but "now most of the large-scale (AI-related) projects are completed."
He also pointed out signs of a slowdown in demand for MS's AI service chatbot Copilot. He noted, "Demand for AI end products is not surging, so it is questionable how the supplier (Nvidia) can continue to grow to the moon." Relatedly, Sundar Pichai, CEO of Google, said at the New York Times (NYT) DealBook Summit on the 4th that "all the low-hanging fruit has been harvested," indicating a slowdown in AI technology development.
Nvidia's stock price fell for four consecutive trading days. On this day, Nvidia's stock closed at $130.39 per share, down 1.22% from the previous day on the New York Stock Exchange. During the session, the $130 level was breached. Compared to the all-time high on the 12th of last month ($148.28 closing price), it has dropped more than 10%.
Meanwhile, Broadcom, a U.S. fabless company rapidly emerging as a rival to Nvidia, also closed down 3.91% at $240.23 on the same day. Broadcom's stock price has surged 45% over the past month following news that it is accelerating the development of its own AI chips in cooperation with big tech companies such as Google, Meta, and Apple in the AI chip market dominated by Nvidia.
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