Does Nvidia Have A Customer Concentration Problem? Mystery Client Accounts For 13% Of 2024 Revenue Amid China Chip Ban, US Sales Surge

Nvidia Corp. NVDA reported an impressive 265% year-over-year revenue growth for the fourth quarter. However, the 10-K report filed with the SEC revealed potential risks due to increasing customer concentration.

Mystery Customer Emerges: The filing disclosed an unnamed customer, designated “Customer A,” accounted for 13% of the fiscal year 2024 revenue. This customer purchased products through the Compute & Networking segment within the Data Center platform, primarily receiving systems, subsystems, or modules with software and services.

Indirect Customer Amplifies Concentration: Further, indirect customer purchasing primarily through system integrators and distributors, including Customer A, represented 19% of total FY24 revenue. Notably, in 2022 and 2023, no single customer constituted 10% or more of revenue.

The Jensen Huang-led company’s direct and indirect customers include public cloud, consumer internet companies, enterprises, startups, public sector entities, OEMs, ODMs, system integrators, AIB, and distributors, it said in the filing.

“Our Data Center platform is powered by increasingly diverse drivers — demand for data processing, training and inference from large cloud-service providers and GPU-specialized ones, as well as from enterprise software and consumer internet companies,” said Huang in the earnings release.

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Why It’s A Big Deal: Nvidia’s high-performance AI accelerators, such as the H100, have been used widely in training and inference of large-language model, a machine-learning model that can perform a variety of natural language processing tasks such as generating and classifying text, conversationally answering questions, and translating text from one language to another.

Nvidia expects Compute & Networking demand to remain concentrated, potentially amplifying this risk.

U.S. Revenue Share Grows: Another noteworthy change is the decline in sales outside the US, falling from 69% in 2023 to 56% in 2024. This could be attributed to the U.S.-China chip ban impacting exports of Nvidia’s high-performance chips to China.

Incidentally, Nvidia, which broke down revenue from Singapore separately in the third quarter, chose to consolidate revenue from the island nation under “Other Countries.”

In the third quarter, Nvidia said it raked in revenue of $2.7 billion from Singapore, up from merely $536 million a year ago. For the nine months ended Oct. 29, 2023, about $4.51 billion in revenue came from Singapore compared to $1.96 billion in the same period last year. Singapore and Other Countries together accounted for $6.76 billion in the nine-month period, which suggests $3.49 billion came from Other Countries, including Singapore, in the fourth quarter.

Price Action: Nvidia ended Thursday’s session down 2.85% to $674.72, but rallied 9.07% in after-hours trading, according to Benzinga Pro data. The after-hours spike came on the back of stellar quarterly results from the company.

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