Nvidia's new chips may significantly hurt cloud companies

Nvidia's new Blackwell chips are creating challenges for major cloud companies like Amazon, Google, and Meta. These chips replace the older Hopper version and are designed to be more powerful for AI tasks. However, the quick transition to newer technology can lead to older chips losing value faster. This situation can negatively impact the profits of these companies. Nvidia CEO Jensen Huang joked at an AI conference that once Blackwell starts shipping widely, "you couldn't give Hoppers away." His comments highlight how quickly older technology can become obsolete. Analysts warn that this rapid change could force companies to adjust the expected lifespan of their hardware, which may significantly affect their earnings. Amazon was the first to address these challenges. In February, CFO Brian Olsavsky noted that the company would shorten the useful life of some servers from six years to five. This change is expected to reduce Amazon's operating income by around $700 million this year. Additionally, Amazon reported costs related to "accelerated depreciation," which could lead to a $600 million hit in 2025. Other companies may face similar issues. Analyst Ross Sandler pointed out that Meta could see more than $5 billion in increased depreciation, while Google might face a $3.5 billion hit to its operating profit. As technology moves quickly, cloud companies must adapt, but this can come at a high cost. The transition to newer GPUs may ultimately lead to reduced profits for these tech giants.