Microsoft decided to make its own AI chips. Shocking development. A company worth two trillion dollars figured out it could save money by not paying Nvidia's markup on every piece of silicon.
Jensen Huang spent the last two years selling H100s like they were concert tickets to see the Beatles in 1964. Margins so fat they needed their own zip code. Microsoft wrote the checks. Smiled for the photos. Built a lab.
Now comes the press release about "expanding margins" and "bolstering the AI stack." Corporate speak for we got tired of being bent over. Every VP at Microsoft watched the same PowerPoint showing how much money walked out the door to Santa Clara. Someone suggested vertical integration. Thirty people nodded. A task force formed.
The homegrown chips will probably work fine. Maybe not as fast as Nvidia's latest. Maybe they run a little hotter. Does not matter. Microsoft will use them anyway because the math works and the CFO gets a bonus.
Retail traders saw this headline and bought Nvidia calls. Figured Microsoft still needs GPUs for something. Diversification play. These are the same people who think buying both Coke and Pepsi makes them Warren Buffett.
Nvidia's stock will be fine. They have a waitlist longer than the DMV. Google makes its own chips too. Amazon makes its own chips. Everyone makes their own chips now. Turns out when you charge enough money for something, your customers start asking how hard it could possibly be.
Microsoft's AI stack gets bolstered. Their margins expand. Nvidia sells one fewer chip per quarter. The market cap of both companies remains higher than the GDP of Norway. Your portfolio does nothing because you bought shares of a cybersecurity penny stock your cousin mentioned at Thanksgiving.
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