Investing.com – After marking a new all-time high at $1,158.19 last Thursday, NVIDIA Corporation (NASDAQ:) stock turned lower, ending the day down 3.77%, and more modestly continued its decline Friday, falling 0.78%.
Note that this correction occurred after 4 consecutive sessions of increase which gave rise to a cumulative gain of almost 21%.
The decline at the end of last week seems at this stage motivated by profit taking that does not call into question the stock’s upward bias. However, this weakness in Nvidia remains a good opportunity to ask what additional upside potential there is, as the stock has more than doubled in value since the start of the year and has gained nearly 180% over one year.
However, beyond the fact that the increase is undoubtedly “stretched”, certain more concrete factors also invite us to be wary of Nvidia stock at its very high current price, particularly given its dependence on a handful of customers.
Nearly half of Nvidia’s business depends on just 4 customers: Danger?
Indeed, in its 10-Q report filed with the SEC early last week, Nvidia said that a single direct customer accounted for 13% of its total revenue in the first quarter of its 2025 fiscal year, while A second direct customer represented 11% of the total. Additionally, the AI chipmaker said it had two indirect customers that each accounted for 10% or more of its total revenue in the first quarter.
In other words, at least 44% of Nvidia’s revenue is based on just 4 customers, a concentration of revenue that comes as major tech companies stock up heavily on Nvidia’s H100 AI chips to expand their capabilities. Generative AI.
Note also that in a note published at the beginning of the week, UBS analysts estimated that Microsoft (NASDAQ:) represented 19% of Nvidia’s total turnover during the 2024 financial year, and remains its largest customer to this day.
However, such concentration suggests that the loss of even one of these customers could have a massive impact on the company’s bottom line, which is all the more worrying given that most of Nvidia’s large customers are currently working on their own chips. of AI.
Besides the fact that Nvidia’s customers are working on their own chips, other companies comparable to Nvidia, such as AMD (NASDAQ:) or Intel (NASDAQ:), could gradually catch up with Nvidia, and trigger a war of price would endanger both sales and profitability.
In other words, buying Nvidia now would be like “coming after the battle”, or almost. Nvidia has indeed been by far the biggest AI winner among mega-caps, but the bull market is now entering a new phase, in which it is probably not the biggest companies that will perform the best in stock exchange.
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