AI summary of the article

Here are the main points from the article titled "Nvidia's Fat Margins Are Google and AMD's Opportunity":

• Nvidia's Dominance and Scrutiny: Nvidia currently dominates the lucrative AI chip market with exceptionally high operating margins (nearly 59%) and gross margins (70%). However, these high margins and recent blowout spending have led to investor concerns about sustainability and attracted intense competition.
• Stock Performance: Nvidia's stock is down 12% since its peak market cap in late October, making it appear inexpensive at 26 times projected earnings. However, this valuation relies on sustained high margins, which may be pressured by new competitors.
• AMD's Competitive Edge: AMD is preparing a major challenge with its MI450 chips, already securing OpenAI as a key customer. AMD's lower current margins give it the flexibility to underprice Nvidia while still improving its own profitability.
• Google's Entry: Google is entering the market by selling its in-house-designed tensor processing units (TPUs). Backed by the immense cash flow from its advertising business, Google poses a significant threat, potentially targeting major Nvidia customers like Meta Platforms.
• Intensifying Competition: While analysts aren't panicking yet, the entry of Google, advances from AMD, and new chips like Amazon's Trainium 3 indicate that maintaining Nvidia's pricing power and high margins will become increasingly difficult.