By UncoverAlpha
Publication Date: 2026-08-13 12:31:00
The relationship between Nvidia and the big hyperscalers Amazon, Google, and Microsoft was once very clear and friendly, where one was a supplier and the other three were buyers. I believe that era is clearly over, as each is trying to commoditize the layer the other serves. The chip design and data center infrastructure markets. This clash is critical for the AI buildout age, as it determines where much of the AI value (margin) ultimately ends up.
You have Nvidia’s Jensen Huang with the strongest balance sheet in semiconductor history and a ~75% gross margin business. On the other side are the three biggest Nvidia customers — Amazon, Microsoft, and Google — who together will spend around $600B in CapEx this year and have all come to the same conclusion: they do not want to keep paying Nvidia’s margin forever.
In the last few years, the relationship was largely defined by Nvidia being the only game in town for AI chips, and most workloads were used for training. But now things are changing, because:
we are shifting to an inference-led market,
Nvidia has a historic high 75% gross margin, and it is bothering the data center ecosystem because it’s long-term hurting their margin
The stakes have just become so much bigger because hundreds of billions, and maybe even soon trillions, per year will be spent on AI chips, and every layer of the AI stack wants to capture as much value as possible.
Let’s dive in.
Most of you know this well, but just to shortly summarize….
