Nvidia is expected to deliver another blockbuster earnings report on Wednesday, but a shift in how artificial intelligence is used is raising doubts on how long its dominance in AI chips can last.
After years of near-monopoly in chips used to train AI systems, Nvidia is facing competition from tech giants building their own chips to capture demand that is shifting toward processors that run AI systems, respond to queries and carry out tasks in real time.
This so-called inference market is much larger, but also more contested.
Traditional rivals Intel and AMD are pushing processors better suited for the smaller, cost-sensitive workloads that dominate the market.
Meanwhile, Alphabet has emerged as a key challenger, striking deals worth tens of billions of dollars for its custom tensor processing units. Amazon’s chip business, including its Trainium processors, is also gaining ground.
“It’s less so Nvidia versus TPUs, Nvidia versus AMD. I think it’s more: is the Nvidia ecosystem as dominant moving forward, as some of these new inference workloads start to proliferate,” said John Belton, portfolio manager at Gabelli Funds, which holds Nvidia shares.
Nvidia’s stock has risen about 19 per cent this year, lagging a two-fold surge in AMD, Intel and Arm, as well as a 27 per cent gain in Alphabet.
To defend its position, the chipmaker unveiled a new central processor and AI system built on technology from Groq in March, an inference-focused startup it bought.
Those chips are not included in Nvidia’s forecast for US$1 trillion in sales from Blackwell and Rubin platforms by 2027 end, leaving investors to closely watch for signs of a new growth engine.
Investors will also be looking out for any sign of supply constraints. Nvidia’s spending on supply commitments jumped from US$50.3 billion to US$95.2 billion between the last two quarters of its latest fiscal year, but it has largely avoided a hit from a global memory chip crunch that have affected Qualcomm and Apple.
Revenue growth accelerates
In the April quarter, Nvidia is expected to post a 79 per cent jump in revenue, its fastest growth in more than a year, according to LSEG data. Adjusted profit likely rose 81.8 per cent to $42.97 billion.
The surge is being driven by massive spending from customers including Microsoft MSFT.O and Meta, with Big Tech expected to pour more than US$700 billion into AI this year, up from around US$400 billion in 2025.
Nvidia CEO Jensen Huang has said the company has secured enough supplies to meet demand for several quarters, easing concerns about capacity constraints, but other risks are emerging.
A slower-than-expected buildout of data centers could limit near-term demand.
“The customers just simply don’t have place to put the GPUs. They want to own as much as they can. They want to buy as much as they can, but they don’t really have the data centers to put them into,” said Chaim Siegel, analyst at Elazar Advisors.
China remains another wildcard. Nvidia has yet to sell its H200 chips there, with Beijing pushing local alternatives, though Huang’s recent trip alongside U.S. President Donald Trump has raised hopes for progress.
Analysts have also said Nvidia’s profit margins - expected to total 74.5 per cent in the first quarter - could come under pressure later in the year due to higher memory and chip packaging costs and the ramp up of its Rubin chips.
(Reporting by Zaheer Kachwala in Bengaluru and Stephen Nellis in San Francisco; Editing by Sayantani Ghosh and Arun Koyyur)
