Can Nvidia (NVDA) Prove it Doesn’t Live or Die by a Handful of Hyperscalers?

Can Nvidia (NVDA) Prove it Doesn’t Live or Die by a Handful of Hyperscalers?

Fatima Gulzar

Sun, September 6, 2026 at 11:21 PM GMT+3 4 min read

NVIDIA Corporation (NASDAQ:NVDA) biggest lingering investor concern was customer concentration, CNBC reported. Nvidia relies on hyperscalers Amazon, Google, and Microsoft, along with major buyers Meta and SpaceX, for an outsized share of revenue, and in May began splitting its data center reporting into "hyperscalers" versus everyone else, a group it calls AI clouds, industrial, and enterprise, or ACIE. In the first quarter, the two segments were nearly even, at $37.9 billion for hyperscalers and $37.5 billion for ACIE, with ACIE growing 31% versus a slower pace for hyperscalers. CEO Jensen Huang has said the "easiest go-to-market" is hyperscalers "because there are only five or six of them," versus "250,000 companies" in the broader industry Nvidia hopes to reach.

Bull Case

NVIDIA Corporation (NASDAQ:NVDA)'s actual results answered the concentration question better than investors feared. In a later quarter, Data Center revenue reached $89 billion (beating the $85.8 billion forecast), while CFO Colette Kress noted that hyperscale revenue more than doubled. ACIE revenue surged 138%, an outcome showing the smaller, more diversified customer base is now growing even faster than the concentrated hyperscaler group Nvidia has leaned on most heavily.

Huang's own framing shows the concentration is a go-to-market choice, not a structural ceiling. Huang has described hyperscalers as simply the "easiest" customers to sell to first because there are only a handful of them, while pointing to roughly 250,000 other companies as the long-term addressable market. It means today's concentration shows where Nvidia started selling, not the limit of where it can sell.

Even Nvidia's most concentrated customers keep buying at scale despite their own cost pressures. Hyperscalers have continued purchasing GPUs in bulk even as their free cash flow gets squeezed by capital spending, evidence that AI infrastructure remains a top spending priority for these companies rather than an area facing near-term cutbacks.

Bear Case

The underlying dependence is still there, even if this quarter's mix improved. Nvidia continues to draw an outsized share of revenue from just three hyperscalers plus Meta and SpaceX. Each of those companies is actively designing its own custom chips specifically to reduce reliance on Nvidia. It is a long-term competitive threat that one strong ACIE quarter does not eliminate.

Hyperscaler customers are under financial strain from the same AI buildout that benefits Nvidia. Hyperscalers are seeing their free cash flow erased by the capital expenditures funding their GPU purchases, and if that financial pressure eventually forces any of them to slow spending, Nvidia's largest revenue source would be directly exposed regardless of how fast the smaller ACIE segment is growing.

NVIDIA Corporation (NASDAQ:NVDA) also has yet to prove that it can rapidly turn its much larger enterprise opportunity into comparable revenue. Bernstein analyst Stacy Rasgon told CNBC that recent financing announcements had produced "a lot of headlines and big numbers and not a lot of details on how this stuff is going to work yet." It means the strategy to convert 250,000 potential customers into revenue remains more promise than proof.

Hedge Fund Data

Insider Monkey's database shows NVIDIA Corporation (NASDAQ:NVDA) was held by 285 hedge funds in the second quarter of 2026, up from 275 in the first quarter, with total holdings valued at $94.67 billion. AMD, the chipmaker most often cited as Nvidia's closest rival, was held by 164 funds, up from 134, with holdings worth $23.58 billion.

Conclusion

Nvidia's growing ACIE business gives investors a clearer diversification story, but its biggest customers still drive most of its sales. If Nvidia expands to smaller clients while tech giants keep spending heavily on AI, it can lower its risk without slowing down growth. However, in-house custom chips and sudden budget cuts from giant buyers could still trigger sharp demand drops.

While we acknowledge the potential of NVDA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on thebest short-term AI stock.

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