Nvidia’s latest results reinforce its dominance in AI chip technology. Revenue has surged to nearly $47 billion, and its data centre division has grown by more than 50% compared to the previous year. Despite these impressive figures, investors responded with caution. Signs of slowing growth, reduced margins and increasing competition indicate that Nvidia has entered a new phase, along with the wider AI industry.
Until now, Nvidia has been viewed as the clear leader in AI hardware. Its chips support everything from cloud platforms to large language models. However, with two major clients believed to be Microsoft and Meta making up nearly one third of its revenue, any cutbacks in spending from these companies add significant risk. This revenue concentration raises concerns for a company so vital to the performance of the S&P 500.
The competitive landscape is also intensifying. Rivals such as AMD and Intel are making faster progress in AI chip development, while cloud providers are creating in-house alternatives to reduce their reliance on Nvidia. At the same time, US export restrictions are limiting Nvidia's access to the Chinese market. This is allowing Chinese competitors with state support to ramp up operations, which is placing further pressure on Nvidia’s margins that have already dropped from nearly 80%.
Despite this, demand for AI infrastructure is rising sharply. Global energy consumption by data centres is set to double before 2030, underlining the growing appetite for computing power. The AI sector remains promising and transformative, but it is becoming clear that no single company will dominate. The ecosystem is widening beyond semiconductors to include cloud providers, software firms, cybersecurity players and energy companies.
This shift is important for investors. Last year, Nvidia accounted for over 25% of gains in the S&P 500. Alongside Apple and Microsoft, it now represents a large portion of the index, exposing investors to risks from relying on just a few major names. This reflects a broader truth that markets tend to perform better when leadership is more evenly shared.
Rather than focusing solely on one company for long-term returns, it may be wiser to spread investments across the growing AI sector. As structural trends continue to drive innovation, fields such as clean energy, software and cloud infrastructure are likely to gain prominence. Nvidia is unlikely to vanish and will remain a key player, but it is no longer the sole force in shaping AI’s rising value.
