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Throughout this earnings season, investors have especially focused on Big Tech’s capital expenditures.
This spending is seen as a barometer of how optimistic Microsoft, Amazon, Meta and Alphabet are about what AI will do for them. But as Julie Hyman wrote on Thursday, it’s a little more complicated than that, as they must go all-in to get a seat at the table.
But the nature of supply chain dynamics means that what accumulates and melts in the mountains washes into rivers and lakes.
And as our Chart of the Week shows, Big Tech is still making it rain. And Nvidia is the lake.
According to Bloomberg estimates, along with quarterly reports, more than 40% of Nvidia’s revenue comes from a few household names among the “Magnificent Seven” stocks – Microsoft, Meta, Alphabet and Amazon.
The biggest transfer comes from Microsoft, with spending from the world’s most valuable company representing 19% of Nvidia’s revenue. That makes the company its biggest customer by far, nearly doubling Meta’s spending and tripling that of Alphabet and Amazon.
And on Microsoft’s side, Bloomberg data shows that Nvidia is responsible for 45% of its capital expenditures, while the chipmaker receives just 15% of Alphabet’s spending, for example.
In the AI jungle, this data is a reminder that chipmakers eat first, long before hyperscalers can offer investors much more than hints about when AI investments will turn into AI revenue streams.
Still, this is one of the key charts that helped drive the market, especially during tech earnings season.
For now, the lack of revenue does not worry investors much – although doubts are increasing! – because it’s still hard to imagine that trillion-dollar Microsoft doesn’t know something it doesn’t know about the opportunity.
Ethan Wolff-Mann is a senior editor at Yahoo Finance and runs newsletters. Follow him on X @ewolffmann.
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