Stacy Rasgon Says Nvidia (NVDA)-Open AI Deal Shows There’s ‘Shortage of Compute’ – ‘Customers Are Lining Up Years in Advance’

Bernstein analyst Stacy Rasgon indicates a critical shortage of AI compute, with customers, exemplified by the NVIDIA (NVDA)-OpenAI deal, securing capacity years in advance, and power infrastructure emerging as a primary constraint. NVIDIA, heavily reliant on AI infrastructure spending with significant revenue from a few key clients, faces potential risks if major tech companies curtail CapEx due to ROI concerns. Despite strong demand ex-China, some investors, like Baird Chautauqua Fund, express caution regarding potential overcapacity in AI datacenter builds.

Analysis

Bernstein senior semiconductor analyst Stacy Rasgon highlights a significant "shortage of compute" in the AI sector, evidenced by the NVIDIA-OpenAI deal and customers securing capacity years in advance. This scarcity, coupled with CEO Jensen Huang's projection of $3-4 trillion in infrastructure spending by decade-end, suggests robust long-term demand. Rasgon further identifies power infrastructure as a potential primary constraint, requiring upfront investment years ahead of compute deployment.

NVIDIA's revenue is heavily concentrated in AI-related infrastructure spending, with three direct customers contributing 56% of accounts receivable in Q2 FY2026 and $41.3 billion of $46.7 billion in the latest quarter's revenue. This concentration poses a risk, as a slowdown in CapEx spending by these major tech companies, driven by ROI concerns, could significantly impact NVDA's stock price.

Despite strong Q1 results and "extremely encouraging" demand commentary ex-China, Baird Chautauqua International and Global Growth Fund maintains an underweight position on NVDA. The fund cites short-to medium-term concerns regarding potential overcapacity from the "feverish AI datacenter build," even as NVIDIA outgrows expectations and competing ASIC products despite supply constraints. The company also took a write-down on China-specific datacenter products following new export restrictions.

Key Decisions for Investors

• Monitor major tech companies' CapEx trends and ROI statements for any indications of a slowdown in AI infrastructure spending, given NVIDIA's customer concentration.
• Assess the long-term implications of power infrastructure limitations on AI compute expansion and NVIDIA's ability to capitalize on sustained demand.
• Evaluate the potential for short-to medium-term overcapacity in AI datacenters, as highlighted by some funds, against NVIDIA's continued strong demand ex-China and market dominance.