Remember when investing in AI was basically like having a cheat code? Just buy Nvidia, sprinkle in some Microsoft and Google, maybe throw in a wild card like Super Micro, and boom – you’re printing money faster than the Fed during a crisis.
Well, plot twist: the game developers just patched that exploit.
While retail investors are still mashing the same buttons expecting infinite gains, the big tech companies are quietly rewriting the rules. They’re done paying Nvidia’s eye-watering 75% profit margins when they can build their own chips for way less cash.
Why Everyone’s Breaking Up With Nvidia
Here’s the thing: using Nvidia’s general-purpose GPUs for specialized AI tasks is like buying a Ferrari to haul groceries. Sure, it works, but you’re paying for a twin-turbo V8 when all you really need is trunk space and decent gas mileage.
The hyperscalers (that’s fancy talk for Google, Amazon, Microsoft, and Meta) have figured out they can design their own chips – called ASICs – that are perfectly tailored to their specific needs. The result? They can slash costs by 30-50% per operation.
And this isn’t some distant future fantasy. It’s happening right now:
- Google’s been using their own TPU chips for most of their AI training
- Amazon just launched Trainium2 chips that supposedly beat Nvidia on price-performance
- Microsoft is rolling out custom Maia chips in their Azure data centers
- Meta is literally shopping for billions of dollars worth of Google’s chips to ditch Nvidia
Translation: The “throw money at everything” phase of AI is over. Welcome to the “actually make this profitable” phase.
Four Companies Cashing In on the Chip Revolution
So where’s all that money going instead? To the companies that make custom chips possible – the picks-and-shovels plays of the new AI economy.
Broadcom (AVGO): Think of them as the arms dealer of the chip wars. Every company building custom silicon needs Broadcom’s intellectual property and design tools. They just signed a massive deal with OpenAI, and their CEO thinks AI revenue could hit $60 billion annually by 2027. Not bad for a “boring” infrastructure play.
Credo Technology (CRDO): The unsung hero of AI networking. When you’re connecting 100,000 chips (like Elon’s Colossus supercomputer), regular cables literally can’t handle the data speeds – the signal just dies. Credo makes special cables with built-in signal boosters. Revenue grew 272% last quarter. Small company, big potential.
Lumentum (LITE): Light beats electricity every time. As AI clusters get massive, you need fiber optics, and fiber needs lasers. Lumentum makes the fancy lasers that power Google and Amazon’s data centers. The industry is upgrading to even faster networking in 2025-2026, which means more laser sales.
Arm Holdings (ARM): The ultimate royalty play. Almost every custom chip uses Arm’s basic architecture, and they collect 1-2% on every chip sold. It’s like owning the patent on wheels – everyone needs them, and you get paid automatically.
The Bottom Line
The AI revolution isn’t ending – it’s just growing up. The easy money phase where you could buy anything with “AI” in the name is over. Now it’s about finding the companies that’ll profit as the industry gets smarter about spending.
The dumb money is still chasing GPU shortages. The smart money is betting on the companies building the infrastructure that makes GPUs obsolete.