TLDR
- Two mystery customers account for 39% of Nvidia’s Q2 revenue, up from 25% last year, raising concerns about customer concentration
- Customer A represents 23% of total revenue while Customer B comprises 16%, but their identities remain undisclosed
- Cloud service providers make up about 50% of Nvidia’s data center revenue, which represents 88% of total company revenue
- Nvidia forecasts $3-4 trillion in AI infrastructure spending by decade’s end, targeting 70% of $50 billion AI data center costs
- Stock initially wobbled on earnings but stabilized as traders viewed guidance as a temporary slowdown rather than derailment
Nvidia revealed that two unnamed customers now represent 39% of its total revenue in the second quarter. This marks a sharp increase from the same period last year when the top two customers accounted for just 25% of sales.
The chipmaker’s latest SEC filing shows Customer A contributed 23% of total revenue. Customer B made up 16% of the quarter’s sales.
These figures have sparked fresh debate about Nvidia’s customer concentration risk. The company’s explosive growth appears increasingly dependent on a small number of large buyers.
Customer Identity Mystery Deepens
Nvidia declined to reveal the identities of these major customers. The company classifies them as “direct customers” rather than end users of its chips.
Direct customers buy chips to build complete systems or circuit boards. They then sell these to data centers, cloud providers, and end users.
Some direct customers are manufacturers like Foxconn or Quanta. Others are distributors or system integrators like Dell.
The mystery deepens further with Nvidia’s customer categories. Some direct customers buy chips for their own use rather than resale.
Two indirect customers each account for over 10% of total revenue. They primarily buy systems through Customers A and B.
An “AI research and development company” contributed meaningful revenue through both direct and indirect channels. This adds another layer to the customer puzzle.
Cloud Providers Drive Data Center Growth
Cloud service providers represent about 50% of Nvidia’s data center revenue. The data center business accounts for 88% of total company revenue.
Finance chief Colette Kress confirmed this concentration during the earnings call. Large hyperscalers continue driving demand for AI infrastructure.
Analysts increasingly watch cloud provider spending commitments to predict Nvidia’s future growth. HSBC analyst Frank Lee sees limited room for earnings upside without clearer 2026 cloud spending expectations.
The top four hyperscalers have doubled their capital expenditure in two years. CEO Jensen Huang cited $600 billion in spending commitments for this year alone.
Stock performance reflected initial investor concerns about guidance. The shares wobbled after earnings but quickly stabilized.
Traders realized the AI boom hadn’t lost momentum. The company merely slowed for a checkpoint rather than hitting a wall.
Market reaction showed Nvidia’s importance to broader indices. At nearly 8% of the S&P 500, the stock drives significant index movement.
The omission of China sales from guidance leaves potential upside. Any Washington-Beijing trade deal could quickly boost revenue projections.
Expanding AI Infrastructure Vision
Huang outlined an ambitious forecast for AI infrastructure spending. The company projects $3-4 trillion in total investment by decade’s end.
Nvidia targets capturing 70% of costs for $50 billion AI-focused data centers. This includes not just graphics processing units but other chips as well.
New customer categories are joining the AI buildout. Enterprises, overseas cloud providers, and “neoclouds” are expanding demand.
Foreign governments represent another growth driver. Nvidia expects $20 billion in “sovereign AI” revenue this year.
The company emphasized demand diversification beyond traditional cloud providers. This broader customer base could reduce concentration concerns over time.
Huang described the current moment as full steam ahead for AI revolution. Hyperscaler spending commitments support this optimistic outlook.
Nvidia reported that two indirect customers each represent over 10% of total revenue, primarily purchasing through its mystery direct customers A and B.
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