Nvidia CEO Jensen Huang joked about something that could cost his biggest customers billions of dollars

Nvidia CEO Jensen Huang joked about something that could cost his biggest customers billions of dollars

  • 22.03.2025 09:00
  • businessinsider.com
  • Keywords: Depreciation, Market Shift

Nvidia CEO Jensen Huang joked that his company's new Blackwell GPUs render older Hopper models obsolete, forcing cloud giants like Amazon, Meta, and Google to adjust asset depreciation, significantly cutting into their earnings.

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Estimated market influence

Nvidia

Nvidia

Negativesentiment_dissatisfied
Analyst rating: Strong buy

Nvidia's release of Blackwell GPUs has caused older Hopper models to become obsolete faster than expected, leading to financial losses for cloud providers like Amazon, Meta, and Google.

Amazon

Amazon

Negativesentiment_dissatisfied
Analyst rating: Strong buy

Amazon Web Services (AWS) had to adjust asset depreciation due to rapid tech advancements, resulting in a $700 million reduction in operating income. Additionally, accelerated depreciation cost AWS $920 million.

Meta

Meta

Negativesentiment_dissatisfied
Analyst rating: Strong buy

Meta is expected to face significant financial hits from the need to adjust asset depreciation, potentially reducing operating income by over $5 billion.

Google

Negativesentiment_dissatisfied
Analyst rating: N/A

Google may experience a decrease in operating profit by $3.5 billion due to accelerated depreciation of older GPU models.

Context

Analysis and Summary: Business Insights and Market Implications

Key Facts and Data Points:

  • Nvidia's Blackwell GPUs: Launched in 2025, these GPUs outperform the older Hopper models (launched in 2022), rendering them less useful for cloud providers.
  • Impact on Cloud Giants:
    • Amazon Web Services (AWS):
      • Reduced server lifespan from 6 to 5 years, cutting operating income by $700 million.
      • Accelerated depreciation cost $920 million, reducing 2025 operating income by $600 million.
    • Meta:
      • Estimated $5 billion increase in depreciation and similar reduction in operating income if server lifespan is reduced by one year.
    • Google:
      • Estimated $3.5 billion decrease in operating profit with a similar lifespan adjustment.
  • Market Trend: Rapid technological advancements are accelerating asset obsolescence, forcing cloud providers to adjust depreciation schedules.

Market Trends and Business Impact:

  • Faster Obsolescence: The rapid release of more powerful GPUs (e.g., Blackwell) is rendering older models (Hopper) obsolete faster than expected.
  • Depreciation Adjustments: Cloud companies are revising asset depreciation schedules, significantly impacting their financial performance.
  • Cost Pressures: Increased competition in AI hardware and cloud services is driving up costs for providers like AWS, Meta, and Google.

Competitive Dynamics:

  • Nvidia's Dominance: Nvidia's leadership in AI chips positions it as a key driver of market trends, with its product launches dictating the pace of innovation.
  • Cloud Provider Challenges: Companies like Amazon, Meta, and Google face pressure to continuously upgrade their hardware, increasing operational costs.

Strategic Considerations:

  • Investment in Innovation: Cloud providers must invest heavily in newer technologies to stay competitive, potentially affecting profitability.
  • Depreciation Management: Proactive management of asset depreciation will be critical for maintaining financial health in the face of rapid technological changes.

Long-Term Effects and Regulatory Impacts:

  • Potential Financial Reporting Changes: Companies may need to adjust accounting practices to reflect faster obsolescence rates.
  • Investor Concerns: Analysts warn that overstated earnings due to delayed depreciation adjustments could lead to investor skepticism and stock price volatility.

This analysis highlights the significant business challenges posed by rapid technological advancements in AI hardware, particularly for cloud providers. The competitive landscape is shifting rapidly, with companies needing to adapt quickly to avoid financial losses.