The analyst highlights that OpenAI and Anthropic are experiencing rapid revenue growth, with Anthropic's expansion making OpenAI's appear slow by comparison, and estimates their combined annual recurring revenue (ARR) at approximately $100 billion with 70% gross margins. NVIDIA maintains an estimated 80% gross margin on its hardware, which is largely used by these labs for inference, and is the largest customer for TSMC, memory, and substrate suppliers. Labs could reduce token costs by 50-60% if they cut NVIDIA out, but continue to rely on and increase spending with NVIDIA while also pursuing competing ASIC programs.
NVIDIA's platform ecosystem and hardware margins remain robust, while frontier AI labs demonstrate significant revenue growth and high margins, indicating value capture across the AI stack.