Wall Street Warns of "Inevitable" Growth Deceleration Coming for NVIDIA

Deep News
Aug 29

Focus: U.S. Stock Earnings Reports for Q2 2025

During the second quarter, Big Tech's massive investments in artificial intelligence continued to drive rapid growth for NVIDIA's (NVDA) data center business. However, Wall Street has begun cautioning about potential growth deceleration risks in this segment, closely monitoring how this trend might impact the AI chipmaker.

NVIDIA reported in its quarterly filing with the Securities and Exchange Commission (SEC) that its data center business generated total revenue of $41 billion for the three months ended July 27 (slightly below Wall Street expectations), with major cloud service providers accounting for approximately half of this revenue.

The data center business represents NVIDIA's largest revenue source. This segment sells AI chips and servers to cloud service providers, who deploy NVIDIA's AI graphics processing units (GPUs) and servers in data centers to remotely provide computational power for artificial intelligence software like OpenAI's ChatGPT.

In the second quarter, Big Tech's share of NVIDIA's revenue increased compared to both the previous quarter and the same period last year. NVIDIA stated that major cloud service providers accounted for "slightly under 50%" of its data center revenue in the first quarter, while according to company filings, these clients represented approximately 45% of this business segment's revenue last year.

Leading Big Tech companies are the primary drivers behind this spending surge. Recent estimates indicate that on an annualized basis, Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN), and Google parent Alphabet (GOOGL, GOOG) collectively contribute over 41% of NVIDIA's revenue.

These companies have significantly increased their AI investments and raised capital expenditure guidance in their latest quarterly reports. The four firms plan to invest a combined $364 billion in fiscal 2025.

This is precisely where NVIDIA's risk lies.

Stifel analyst Ruben Roy noted that NVIDIA's "biggest risk" stems from Big Tech pausing capital expenditures. "While supply chain research suggests this won't occur before 2026, this risk itself is inevitable," he stated.

William Blair analyst Sebastien Naji also pointed out that any slowdown in AI spending would pose "significant risks" to NVIDIA, though he added that "most indicators suggest AI investment will maintain robust growth in the coming years."

DA Davidson analyst Gil Luria commented: "As long as cloud service providers' customers are willing to rent computing power, these providers will continue investing."

He added: "If demand for computing power weakens, they might slow spending, but this hasn't happened yet." However, Luria acknowledged that Big Tech customers have generated virtually no returns on their AI investments to date, with many operating at losses.

Concerns about potential AI spending reduction have intensified in recent weeks. A Massachusetts Institute of Technology (MIT) report showed that 95% of enterprises have not achieved returns from generative AI. Additionally, OpenAI CEO Sam Altman described the current situation as an "AI bubble." These developments triggered brief tech stock sell-offs last week, heightening market fears that Big Tech might reduce spending on AI infrastructure, including chips and servers, which would impact NVIDIA.

Regarding NVIDIA itself, the company reports its AI chips are experiencing "surging global demand," with its latest Blackwell Ultra GB300 servers expected to be fully available in the second half of 2025.

During the analyst conference call following the second-quarter earnings release on Wednesday evening, August 27, NVIDIA CEO Jensen Huang stated: "We're seeing both attention and demand for AI reach extremely high levels in the market."

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