Nvidia’s Physical AI Push Drives 90% of Production Costs, Sparks 15% Rally
NVDA•Nvidia’s expansion into physical AI now drives 90% of its production costs through Asian partners, triggering double-digit rallies at LG Electronics (15%) and Nanya Technology (10%). Commitments nearing $200 billion from hyperscalers underpin Nvidia’s supply chain momentum, with Nvidia representing half of Microsoft’s and a quarter of Amazon’s AI capex.
1. Expansion into Physical AI
Nvidia has broadened its focus beyond pure semiconductor design into robotics, autonomous systems and AI-enabled manufacturing, a move CEO Jensen Huang describes as the next wave of artificial intelligence. This pivot has shifted approximately 90% of Nvidia’s production costs to Asian partners, up from around 65% last year, reflecting deeper collaboration with regional suppliers.
2. Rally in Asian Supply Chain
Several Asian companies have reported significant share price gains following announcements of partnerships with Nvidia. LG Electronics shares rose as much as 15% on plans to integrate home robots with Nvidia’s platform, while Taiwan’s Nanya Technology jumped 10% after unveiling memory solutions tied to Nvidia’s physical AI initiatives. Other suppliers of sensors and robotics components have seen similar double-digit advances.
3. Hyperscaler Capex Impact
Large cloud providers—Amazon, Microsoft and Alphabet—are committing nearly $200 billion to AI infrastructure this year, with Nvidia chips representing roughly half of Microsoft’s and a quarter of Amazon’s AI spending. This sustained capex flow is expected to bolster demand for Nvidia’s hardware across the supply chain, driving further profit growth at manufacturing partners like Samsung and SK Hynix.
