Nvidia CEO says customer relations are “strained” due to shortage

(Bloomberg) — The chief executive of Nvidia Corp. Jensen Huang, whose products have become the hottest commodity in the tech world, said the battle for limited supply has frustrated some customers and raised tensions.

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“The demand is so high and everybody wants to be first and everybody wants to be the biggest,” he told the audience at a Goldman Sachs Group Inc. technology conference. from San Francisco. “We probably have more emotional customers today. Well deserved. It’s tense. We’re trying to do the best we can.”

Huang’s company is experiencing strong demand for its latest generation of chips, called Blackwell, he told the audience. The Santa Clara, Calif.-based business outsources the physical production of its hardware, and Nvidia suppliers are making progress on the recovery, he said.

Nvidia chips are used by data center operators to develop and run artificial intelligence models. And the feverish appetite for such services has sent sales — and the stock price — soaring. The stock has doubled this year after a 239% gain in 2023.

The stock gained 8.1 percent to $116.91 in New York on Wednesday, marking its biggest one-day gain in six weeks.

But the company relies on a small number of customers – data center operators such as Microsoft Corp. and Meta Platforms Inc. – for a large part of his income.

Huang was asked if the massive spending on artificial intelligence offers customers a return on investment. This was a concern during the AI ​​frenzy in the tech industry.

But he said companies have no choice but to embrace “accelerated computing”. Nvidia’s technology accelerates conventional workloads — data processing — as well as handling AI tasks that older technology can’t handle, he said.

Nvidia relies heavily on Taiwan Semiconductor Manufacturing Co. for the production of its most important chips, and it does so because that company is the best in its field by a wide margin, Huang said. But geopolitical tension has raised risks. China views TSMC’s home island as a rogue province, raising concerns that it may try to reclaim the territory. This could cut Nvidia off as a key supplier.

Huang said it develops much of the company’s technology in-house, and that should allow Nvidia to shift orders to alternative suppliers. However, such a change would likely lead to a reduction in the quality of its jets, he said.

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“TSMC’s agility and their ability to respond to our needs is simply incredible,” he said. “So we use them because they’re great, but if needed, of course, we can always bring in others.”

(Updates with stock performance in fifth paragraph.)

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