AI microchip supplier Nvidia, the world’s most valuable company by market cap, remains heavily dependent on a few anonymous customers that collectively contribute tens of billions of dollars in revenue. 

The AI chip darling once again warned investors in its quarterly 10-Q filing to the SEC that it has key accounts so crucial that their orders each crossed the threshold of 10% of Nvidia’s global consolidated turnover. 

An elite trio of particularly deep-pocketed customers, for example, individually purchased between $10 billion and $11 billion worth of goods and services across the first nine months that ended in late October.

Fortunately for Nvidia investors, this won’t change anytime soon. Mandeep Singh, global head of technology research at Bloomberg Intelligence, says he believes founder and CEO Jensen Huang’s prediction that spending will not stop.  

“The data-center training market could hit $1 trillion without any real pullback,” he says. By that point, Nvidia’s share will almost certainly drop markedly from its current 90%. But it could still be in the hundreds of billions of dollars in revenue annually.

Nvidia remains supply constrained

Outside of defense contractors living off the Pentagon, it’s highly unusual that a company has such a concentration of risk among a handful of customers—let alone one poised to become the first worth the astronomical sum of $4 trillion.

Looking at Nvidia’s accounts on a strictly three-month basis, there were four anonymous whales that, in total, comprised nearly every second dollar of sales in the second fiscal quarter; this time at least one of them has dropped out since now only three still meet that criteria. 

Singh told Fortune the anonymous whales likely include Microsoft, Meta, and possibly Super Micro. But Nvidia declined to comment on the speculation.

Nvidia only refers to them as Customers A, B, and C, and all told they purchased a collective $12.6 billion in goods and services. This was more than a third of Nvidia’s overall $35.1 billion recorded for the fiscal third quarter through late October. 

Their share was also divided up equally with each accounting for 12%, suggesting they were likely receiving a maximum amount of chips allocated to them rather than as many as they might have ideally wanted. 

This would fit with comments from founder and CEO Jensen Huang that his company is supply constrained. Nvidia cannot simply pump out more chips, since it has outsourced wholesale fabrication of its industry-leading AI microchips to Taiwan’s TSMC and has no production facilities of its own.

Middlemen or end user?

Importantly, Nvidia’s designation of major anonymous customers as Customer A, Customer B, and so on is not fixed from one fiscal period to the next. They can and do change places, with Nvidia keeping their identity a trade secret for competitive reasons; no doubt these customers would not like their investors, employees, critics, activists, and rivals being able to see exactly how much money they spend on Nvidia chips.

For example, one party designated “Customer A” bought around $4.2 billion in goods and services over the past quarterly fiscal period. Yet it appears to have accounted for less in the past, since it does not exceed the 10% mark across the first nine months in total.

Meanwhile “Customer D” appears to have done the exact opposite, reducing purchases of Nvidia chips in the past fiscal quarter yet nevertheless representing 12% of turnover year to date.

Since their names are secret, it’s difficult to say whether they are middlemen like the troubled Super Micro Computer, which supplies data center hardware, or end users like Elon Musk’s xAI. The latter came out of nowhere, for example, to build up its new Memphis compute cluster in just three months’ time. 

Longer-term risks for Nvidia include the shift from training to inference chips

Ultimately, however, there are only a handful of companies with the capital to be able to compete in the AI race, as training large language models can be exorbitantly costly. Typically these are the cloud computing hyperscalers such as Microsoft.

Oracle, for example, recently announced plans to build a zettascale data center with over 131,000 Nvidia state-of-the-art Blackwell AI training chips, which would be more powerful than any individual site yet existing. 

It’s estimated the electricity needed to run such a massive compute cluster would be equivalent to the output capacity of nearly two dozen nuclear power plants.

Bloomberg Intelligence analyst Singh sees only a few longer-term risks for Nvidia. For one, some hyperscalers will likely reduce orders eventually, diluting its market share. One such likely candidate is Alphabet, which has its own training chips called TPUs.

Secondly, its dominance in training is not matched by inference, which runs generative AI models after they have already been trained. Here, the technical requirements are not nearly as state of the art, meaning there is much more competition, not just from rivals like AMD but also companies with their own custom silicon like Tesla. Eventually inference will be a much more meaningful business as more and more businesses utilize AI. 

“There are a lot of companies trying to focus on that inferencing opportunity, because you don’t need the highest-end GPU accelerator chip for that,” Singh said. 

Asked if this longer-term shift to inferencing was a bigger risk than eventually losing share in the market for training chips, he replied: “Absolutely.”

This story was originally featured on Fortune.com

Harvard University has become the latest target in the Trump administration’s approach to fight campus antisemitism, with the announcement of a new “comprehensive review” that could jeopardize billions of dollars for the Ivy League college.

A federal antisemitism task force is reviewing more than $255 million in contracts between Harvard and the federal government to make sure the school is following civil rights laws, the administration announced Monday. The government also will examine $8.7 billion in grant commitments to Harvard and its affiliates.

The same task force cut $400 million from Columbia University and threatened to slash billions more if it refused a list of demands from President Donald Trump’s administration. Columbia agreed to many of the changes this month, drawing praise from some Jewish groups and condemnation from free speech groups, who see it as a stunning intrusion by the federal government.

Dozens of other universities have been put on notice by the Trump administration that they could face similar treatment over allegations of antisemitism. The federal government is a major provider of revenue for American universities through grants for scientific research.

Education Secretary Linda McMahon said Harvard symbolizes the American Dream, but has jeopardized its reputation by “promoting divisive ideologies over free inquiry” and failing to protect students from antisemitism.

“Harvard can right these wrongs and restore itself to a campus dedicated to academic excellence and truth-seeking, where all students feel safe on its campus,” McMahon said in a statement.

Harvard did not immediately respond to messages seeking comment. The elite university is among more than 100 colleges and school systems facing investigations for antisemitism or Islamophobia following Hamas’ Oct. 7, 2023, attack against Israel. The Trump administration has promised tougher action than its predecessor, naming antisemitism as the top priority for civil rights investigations.

Monday’s announcement didn’t say whether the government had made any specific demands of Harvard. The Education Department, the Health and Human Services Department and the U.S. General Services Administration are leading the review of its contracts and grants.

Those agencies will determine whether orders to halt work should be issued for certain contracts between Harvard and the federal government, the government said. The task force is also ordering Harvard to submit a list of all contracts with the federal government, both directly with the school or through any of its affiliates.

“The Task Force will continue its efforts to root out anti-Semitism and to refocus our institutions of higher learning on the core values that undergird a liberal education,” said Sean Keveney, acting general counsel for Health and Human Services. “We are pleased that Harvard is willing to engage with us on these goals.”

Some of the nation’s most prestigious colleges have faced extraordinary scrutiny from Republicans in Congress following a wave of pro-Palestinian protests that started at Columbia and spread across the country last year. Presidents of several Ivy League schools were called before Congress over allegations that they allowed antisemitism to fester.

The hearings on Capitol Hill contributed to the resignation of presidents at Harvard, Columbia and Penn. The interim president who took over at Columbia, Katrina Armstrong, resigned last week after the school agreed to the government’s demands.

Trump and other officials have accused the protesters of being “pro-Hamas.” Student activists say they oppose Israel’s military activity in Gaza.

Instead of going through a lengthy process that allows the Education Department to cut funding from schools that violate civil rights laws, the Trump administration has found quick leverage by pulling contracts and grants. The tactic is being challenged in a federal lawsuit brought by the American Association of University Professors and the American Federation of Teachers.

This story was originally featured on Fortune.com

Source link

In the span of just three weeks, Rocket Cos. has thrown around more than $11 billion in a bid to reshape the way Americans buy, sell and finance their homes.

The goal: make everything run through Rocket, from start to finish.

In Rocket’s vision of the housing market, buyers and sellers will connect through Redfin Corp., the home-search platform it agreed to purchase for $1.75 billion earlier this month. Then homebuyers in need of a mortgage will turn to Rocket, which has become the No. 3 player in an industry once dominated by banks. And, finally, that loan will need servicing, which can be done by Mr. Cooper Group Inc., which Rocket announced on Monday that it will buy in an all-stock deal valued at $9.4 billion.

“This deal doesn’t just signal consolidation, it marks a fundamental shift in how homeownership services are structured, delivered and scaled through technology and vertical integration,” Kirill Krylov, a senior portfolio strategist at Robert W. Baird & Co., wrote in a note to clients Monday.

The sweeping moves, which have stunned the real estate industry, come as the US housing market suffers from persistently high interest rates and home prices that have sidelined many would-be buyers. Last year, sales of previously owned homes fell to the lowest level since 1995. The deals will also cement Rocket’s position as a mortgage behemoth, after banks including Wells Fargo & Co. have largely pulled out of the business.

The timing of the announcements, just months into Donald Trump’s presidency, point to Rocket’s optimism that the financial-technology firm will face fewer regulatory hurdles in its bid to get bigger. Detroit-based Rocket has ambitions of bringing every kind of consumer-finance transaction under its umbrella, as evidenced by its push into credit cards and personal loans to smooth out earnings historically tied to the ebb and flow of mortgage rates.

The combined Rocket and Mr. Cooper will service a book of $2.1 trillion of loans and nearly 10 million clients, according to Monday’s statement. Mr. Cooper shareholders will receive 11 Rocket shares for each of Mr. Cooper’s stock they own, representing a 35% premium, the companies said. As of the end of 2024, Rocket was the third-largest US mortgage originator, behind United Wholesale Mortgage and PennyMac Financial Services Inc., according to data from Inside Mortgage Finance.

Out of the gate, the tie-up with Mr. Cooper is expected to generate run-rate revenue and cost synergies of approximately $500 million, Rocket said. The benefits of the servicing-focused deal can also have a balancing effect for Rocket’s lending business.

When interest rates rise, borrowers are less likely to refinance, unlocking extended payments for the servicer. That provides a helpful counterbalance for Rocket’s home-loan business, which tends to see originations decline when rates rise. Similarly, when they fall, there’s more refinancing, so the lending business becomes more valuable while the servicing business is hurt.

Rocket is positioning itself to take advantage of both scenarios.

Uniting the top retail originator with the industry-leading servicer should strengthen Rocket’s ability to drive lower-cost growth through “its origination-servicing flywheel,” Zelman & Associates analyst Ryan McKeveny said in a note to clients Monday.

The boards of both companies have already approved the deal, which is scheduled for completion in the fourth quarter after receiving regulatory approvals, the firms said. Following the deal, Mr. Cooper Chief Executive Officer Jay Bray will become president and CEO of the Rocket Mortgage division, reporting to Rocket CEO Varun Krishna. Billionaire Dan Gilbert will remain chairman of the broader Rocket Cos. company.

Rocket’s ascension can be attributed in part to the fallout of the 2008 financial crisis, when Wall Street banks largely retreated from the space. Bank of America Corp. became the nation’s largest mortgage lender and loan servicer with its 2008 purchase of Countrywide Financial Corp. BofA was the 19th-largest home lender by volume in 2024, according to Inside Mortgage Finance.

‘Musical Chairs’

“It’s like a game of musical chairs, and Rocket just grabbed two more chairs,” said Mike DelPrete, who teaches courses on real estate technology at the University of Colorado Boulder. “If you’re a company that isn’t part of an ecosystem, when the music stops you might be out.”

Nonbank mortgage servicers also grew in the post-financial-crisis period, with then-major players Nationstar, Ocwen and Walter snapping up servicing contracts from the big banks that wanted to cut their exposure to the mortgage business. Nationstar renamed itself Mr. Cooper in 2017.

“When you look at how the world has evolved and the world has changed, the mortgage business has become far more competitive, much more difficult to run really efficiently inside of a large bank,” Wells Fargo & Co. CEO Charlie Scharf said at an investor conference last May. “Not that it’s not possible, but it has brought with it a huge amount of risk.”

Regulators’ Concerns

Regulators have previously expressed concerns about whether tying together components of the homebuying process result in fewer options and higher rates for consumers. Late in Joe Biden’s presidency, the Consumer Financial Protection Bureau sued a unit of Rocket for giving incentives to and pressuring real estate agents to exclusively refer homebuyers to the lender. 

The scheme — which the financial regulator said violated the Real Estate Settlement Procedures Act, a 1974 law governing homebuying transactions — resulted in buyers with higher mortgage rates and less competition in the industry. At the time, Rocket called the CFPB’s claims “a distortion of reality.”

That lawsuit, along with a slew of others, was dropped by the CFPB after Trump took office. The new administration largely shuttered the consumer-finance watchdog, with the future of the CFPB in limbo as efforts to shut it down make their way through the courts.

Both Mr. Cooper’s Bray and Rocket’s Krishna said they expect the deal to win regulatory approval.

“We have a lot of confidence that we’ll get this deal done,” Krishna said on a conference call with analysts Monday.

Banks Displaced

Since 2008, nonbanks have been steadily displacing banks in handling mortgage payments for US homeowners. Over the past decade, the share of mortgages in Fannie Mae and Freddie Mac securities serviced by nonbank mortgage-servicing companies rose to 60% from about 35%, according to a report last year from the Financial Stability Oversight Council. 

Rocket has a reputation for getting homeowners to refinance their loans faster than other servicers, so its takeover of Mr. Cooper-serviced mortgages may mean that those homeowners end up refinancing their debt at a faster rate.

Since many of these mortgages are packaged into bonds as part of the $10 trillion-plus market for mortgage-backed securities insured by the US government, that means investors who own those securities will end up getting their money back sooner than anticipated, increasing pricing volatility.

“Rocket is known for getting borrowers to refinance their mortgages really quickly compared to other companies that handle mortgage payments,” said Walt Schmidt, a strategist at FHN Financial. “So for bond investors, there’s a greater risk now that they’ll get their money back early if interest rates fall.”

This story was originally featured on Fortune.com