[tomrod]

Two concepts

- Monopsony is the inverse of Monopoly -- one buyer. Walmart is often a monopsony for suppliers (exclusive or near exclusive).

- Desire for vertical integration and value extraction, related to #1 but with some additional nuances

[next_xibalba]

Who is the one buyer in the Nvidia scenario? How would that benefit Nvidia?

[KaoruAoiShiho]

It would hurt nvidia not benefit, that's why nvidia spends a lot of effort to prevent that from happening, and it's not the case currently.

They really need to avoid the situation in the console market, where the fact there's only 3 customers means almost no margins on console chips.

[next_xibalba]

Prior to the A.I. boom, Nvidia had a much, much more diverse customer base in terms of revenue mix. According to their 2015 annual report[1], their revenues were spread across the following revenue segments: gaming, automotive, enterprise, HPC and cloud, and PC and mobile OEMs. Gaming was the largest segment and contributed less than 50% of revenues. At this time, with a diverse customer base, their gross margins were 55.5%. (This is a fantastic gross margin in any industry outside software).

In 2025 (fiscal year), Nvidia only reported two revenue segments: compute and networking ($116B revenue) and graphics ($14.3B revenue). Within the compute and networking segment, three customers represented 34% of all revenue. Nvidia's gross margins for fiscal 2025 were 75% [2].

In other words, this hypothesis doesn't fit at all. In this case, having more concentration in extremely deep pocketed customers competing over a constrained supply of product has caused margins to sky rocket. Moreover, GP's claim of monopsony doesn't make any sense. Nvidia is not at any risk of having a single buyer, and with the recent news that sales to China will be allowed, the customer base is going to become more diverse, creating even more demand for their products.

[1] https://s201.q4cdn.com/141608511/files/doc_financials/annual...

[2] https://s201.q4cdn.com/141608511/files/doc_financials/2025/a...

[tomrod]

I'm not sure your analysis is apples to apples.

Prior to the AI boom, the quality of GPUs slightly favored NVidia but AMD was a viable alternative. Also, there are scale differences between 2025 and before the AI boom -- simply put, there was more competition in the market for a smaller bucket and favorable winds on supplier production costs. Further, they just have better software tooling through CUDA.

Since 2022 and the rise of multi-billion parameter models, NVidia's CUDA has had a lock on the business side, but face rising costs due to terrible trade policy by the US, significant rebound from COVID as well as geopolitical realignments, inflation on the workforce, and rushed/buggy power supplies as their default supply options have made their position quite untenable -- mostly CUDA is their saving grace. If AMD got their druthers about them and focused they'd potentially unseat NVidia. But until ROCm is at least _easy_ nothing will happen there.

[next_xibalba]

I merely comment on the concentration of customers and how it has not at all hurt Nvidia's margins. In fact, they have expanded quite dramatically. All of your other points are moot.

> "rising costs"

Nvidia's margin expansion would suggest otherwise. Or at least, the costs are not scaling with volume/pricing. Again, all we need to do is look at the margins.

> "their position quite untenable ... But until ROCm is at least _easy_ nothing will happen there"

Seems like you're contradicting yourself. Not sure what point you're trying to make. Bottom line is, there is absolutely no concern about monopsony as suggested by the GP. Revenue is booming and margins are expanding. Will it last? Who knows. Fat margins tend to invite competition.

[KaoruAoiShiho]

Nobody said this was the case...

The only example I used was the console market which has been ruined because of this issue. They generally left that market because it was that horrible.

[Jlagreen]

The console market is low margin because they seem to find someone ready to take low margin (e.g. AMD). Nvidia was in console market before but left it due to low margin. Nvidia only sells old low development chip with probably good margin to Nintendo. The chips in the Switch 2 are using node from 2020 and are super cheap in manufacturing and Nvidia had low efforts in developing them.

AMD however has to design new special APUs for Xbox and PS. Why do they do that? They could just decide to step away from the tender but they won't because they seem to be desperate for any business. Jensen was like that 20 years ago but he has learned that some business you simply step away from.

[next_xibalba]

This whole subthread is about the claim that Nvidia is at risk of a monopsony situation. I pointed out that while revenue has concentrated on a few customers post-AI boom, margins have improved, suggesting Nvidia is nowhere near and not veering toward that risk. Revenue is exploding, as are margins.