This is The Takeaway from today’s Morning Brief, that’s possible to register to receive in your inbox every morning, along with:
Throughout this earnings season, investors have focused on Big Tech’s capital expenditures.
These expenditures are seen as a barometer of how optimistic Microsoft, Amazon, Meta and Alphabet are about what AI will do for them. Although, as Julie Hyman wrote on Thursday, it’s a little more complicated than that, as they’ll have to go all-in to even get a seat at the table.
But the nature of supply chain dynamics means that what collects and melts in the mountains ends up in the rivers and lakes.
And as our Chart of the Week shows, Big Tech is still making it rain. And Nvidia is more.
According to Bloomberg estimates, coupled with quarterly reports, more than 40% of Nvidia’s revenue comes from some well-known names from the “Magnificent Seven” stocks: Microsoft, Meta, Alphabet and Amazon.
The largest transfer comes from Microsoft, with the world’s most valuable company spending accounting for 19% of Nvidia’s revenue. This makes the company by far its largest customer, nearly doubling Meta’s spend and tripling that of Alphabet and Amazon.
And on Microsoft’s side, Bloomberg data shows that Nvidia is responsible for 45% of its capital expenditures, while the chipmaker gets just 15% of Alphabet’s spending, for example.
In the AI jungle, this data reminds us that the chipmakers eat first, long before the hyperscalers can offer investors much more than just hints about when AI investments will turn into AI revenue streams.
Still, this is one of the key charts that have helped the market, especially during tech earnings season.
For now, the lack of revenue isn’t too worrying for investors – although doubts are growing! – because it’s still hard to imagine Microsoft making something they don’t know about the opportunity worth a trillion dollars.
Ethan Wolff-Mann is a Senior Editor at Yahoo Finance and provides newsletters. Follow him on X @ewolffmann.
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