Nvidia: Decoding Massive Growth: AI & Cloud Partnerships

Did you know? Cloud hyperscalers fueled >40% 🏆 of NVIDIA's record-breaking revenue in Q4. While the company made history adding $277Bn to its market value in a day, the unsung hero behind the scenes might be its partnerships strategy. Let's take a look.

📈 The Core of Nvidia's Revenue Surge

Nvidia accelerated S&P 500 to a record level, fueling excitement over AI.

The primary driver of Nvidia's skyrocketing revenue is its Data Center line of business. It includes GPUs, supercomputers, servers, software and networking offerings to help businesses run AI, data analysis, etc. faster and more efficiently.

Data Center grew 3X YoY reaching $47.5Bn in revenue in FY24 and now contributing 78% to the total annual revenue.

Intriguingly, the majority of this revenue stems from cloud hyperscalers.

✨☁️ AI Meets Cloud: A Synergistic Growth

Nvidia’s CFO, Colette Kress, revealed that cloud hyperscalers now account for over 50% of their Data Center revenue, which saw a phenomenal 409% YoY jump in Q4:

“In the fourth quarter, large cloud providers represented more than half of our data center revenue, supporting both internal workloads and external public cloud customers.”

This surge is rooted in Nvidia's compelling pitch to cloud providers highlighting 5X multiplier:

“$1 upfront investment in NVIDIA compute and networking can translate to $5 in CSP revenue over 4 years”.

❄️ Nvidia's Distribution Strategy: Ecosystem Focus

Central to Nvidia's distribution and product allocation strategy (GPUs are still in high demand after all) is its emphasis on connecting customers with partners. CEO Jensen Huang emphasized the importance of this ecosystem approach:

“We have an excellent ecosystem with OEMs, ODMs, CSPs and, very importantly, end markets. What NVIDIA is really unique about is that we bring …our partners, CSPs and OEMs, we bring them customers.

The biology companies, the healthcare companies, financial services companies, AI developers, large-language model developers, autonomous vehicle companies, robotics companies…are working on NVIDIA's platform. We support them directly.

And oftentimes, we can have a twofer by allocating to a CSP and bringing the customer to the CSP at the same time. And so this ecosystem, you're absolutely right that it's vibrant. But at the core of it, we want to allocate fairly with avoiding waste and looking for opportunities to connect partners and end users. We're looking for those opportunities all the time.”

💰 One of Partners Alone Drives $6B+ in Revenue

Hyperscalers are a key distribution channel and the largest customers for Nvidia.

While in FY22-23 Nvidia didn’t have customers with >10% of its total revenue, a shift occurred in FY24:

“We receive a significant amount of our revenue from a limited number of customers within our distribution and partner network. Sales to one customer, Customer A, represented 13% of total revenue...

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