Tom Gardner

Amazon now has a run rate of $20 billion for its internal chip business.

What they're going to do is, they're going to move their internal workloads

their repetitive AI workloads onto their own chips.

This will place margin pressure on Nvidia because we're not talking about the hyperscalers just being some side businesses that aren't that important, right?

They are significant.

So I do think we're going to see a flattening out of Nvidia's margins and their returns on invested capital.

Now, as John's pointed out, that comes against the tidal wave of demand everywhere else for what Nvidia has to offer.

I would simply say that as an NVIDIA shareholder, and I'm sure most of our listeners here have individual shares of NVIDIA and definitely have it in index funds, of course, the thing to look for in the business now is the direction of, I would say, gross margins, operating margins, return on assets, return on invested capital.

Just see, are they losing that rim of demand from the hyperscalers that they're now able to build their own custom chips to meet that internal work that they're doing?

Is that going to start to impact margins?

if we see any material margin declines and then i think you do need to start getting a little bit worried about the valuations for nvidia obviously nvidia's business is going to be glowing for the next 10 plus years the question is the price we're paying for a share of nvidia stock tied to the historic margins and returns on capital and if those begin to diminish then we could see you know some cap and some ceiling on nvidia's valuation but

As far as I can see right now, I think NVIDIA has rewarded its shareholders for so many good reasons.

Jensen Wang is arguably the greatest leader in American history in business.

I don't see any reason to part ways with shares of NVIDIA, but I would just be watching their margins and returns on capital and see what happens.

Particularly, take a look and follow Amazon's chip business and start to see what those impacts are on long-term margins for NVDA.

Well, hello, Fools.

We're so excited to spend the next half hour or so with the Chief Financial Officer of IBM, Jim Cavanaugh, and Matt Frankel, our Hidden Gems Investment Analysts, helping out throughout.

Jim, thank you so much for this time.

Let's hope we don't let you down.

We're so excited about this.