Nvidia CEO Jensen Huangrecently made a joke that the company’s biggest customers may not appreciate. The joke was about Nvidia’s latest AI chip-and-server package, Blackwell. The newly introducedBlackwellchips are better than the previous version, Hopper, which was launched in 2022. Several major cloud companies, including Amazon, Microsoft and Google, buy these GPU systems as they use them to train and run the giant models powering generative AI. Facebook-parent Meta has also been buying many of these GPUs in recent years. These companies should be happy about a more powerful GPU like Blackwell as it’s generally good for the AI community. However, there may be a problem as rapid technological advancements (Blackwell) quickly render older versions (Hopper) less valuable, forcing cloud companies to depreciate these assets faster, which in turn can significantly impact their earnings.

What Nvidia CEO Jensen Huang said about Hooper chips

Speaking at Nvidia’s AI conference, Huang said: “I said before that when Blackwell starts shipping in volume, you couldn’t give Hoppers away. There are circumstances where Hopper is fine. Not many.”
In a statement to Business Insider, Ross Sandler, a tech analyst at Barclays also warned investors that major cloud companies and Meta will likely need to implement these changes, potentially resulting in a substantial reduction in profits.

How GPU obsolescence may hurt Amazon, Google and Meta

Amazon Web Services (AWS), the largest cloud provider, was the first to experience these challenges in February. On the company’s earnings call last month, CFO Brian Olsavsky stated that they “observed an increased pace of technology development, particularly in the area of artificial intelligence and machine learning.”
“As a result, we’re decreasing the useful life for a subset of our servers and networking equipment from 6 years to 5 years, beginning in January 2025,” he added noting that this change will cut operating income this year by about $700 million.
Additionally, Olsavsky mentioned that Amazon had “early-retired” some of its servers and network equipment, with this “accelerated depreciation” costing around $920 million and expected to reduce operating income by roughly $600 million in 2025.
Sandler’s research note also showed that the rental cost of H100 GPUs, which uses Nvidia’s older Hopper architecture, has sharply fallen as the newer, superior Blackwell GPUs become more widely available.
“This could be a much larger problem at Meta and Google and other high-margin software companies,” Sandler noted.
According to his estimates, for Meta, shortening the useful life of its servers by one year would boost depreciation in 2026 by over $5 billion and similarly reduce operating income. For Google, a comparable adjustment would lower operating profit by $3.5 billion, Sandler added.