One tiny country drove 15% of Nvidia’s revenue – here’s why it needs so many chips

As Nvidia posted stellar third-quarter results last week, industry observers pointed out that a substantial amount of the U.S. chip giant’s revenue came from one small country.

About 15% or $2.7 billion of Nvidia’s revenue for the quarter ended October came from Singapore, a U.S. Securities and Exchange Commission filing showed. Revenue coming from Singapore in the third quarter jumped 404.1% from the $562 million in revenue recorded in the same period a year ago. This outpaced Nvidia’s overall revenue growth of 205.5% from a year ago.

Singapore only trailed behind the U.S. (34.77%,) Taiwan (23.91%) and China including Hong Kong (22.24%) in Nvidia’s third-quarter sales rankings.

“I would highly think it’s due to data centers as Singapore has quite a lot of data centers and cloud service providers,” Maybank Securities analyst Jarick Seet told CNBC.

“The chips could also be sent to Singapore for final assembly with other products and then shipped out to other countries,” said Seet. They could also be used for artificial intelligence, computing and electric vehicles, he added.

“What’s a tiny city-state doing with all those chips? Building data centers, of course!,” said Sang Shin, an ex-Temasek and GIC executive, in a LinkedIn post. He previously served as director of digital innovation at Temasek and head of digital strategy and architecture at GIC.

“Because the nation is stable and secure, there is a lot of talent, the digital infrastructure is solid, and the government policies are conducive to digital and data services,” said Shin.

The same SEC filing revealed that 80% of Nvidia’s third-quarter sales came from the data center segment, while gaming, professional visualization, automotive and others make up the rest.

“Cloud service providers drove roughly half of data center revenue, while consumer internet companies and enterprises comprised approximately the other half,” said Nvidia in the filing.

Nvidia did not break down its Singapore revenue by business segment.

“Regarding Singapore, a certain consumer internet company purchased data center solutions in Q3 to be stood up in Singapore data centers. Lastly, Singapore is also a growing area of specialized CSPs standing up data centers in the region,” Citi analysts wrote in a Nov. 27 report.

In January 2022, Singapore lifted a moratorium issued in 2019 that temporarily paused the release of land for data center use and sought to moderate the growth of data centers. Singapore subsequently awarded rights in July to Equinix, Microsoft, Chinese data center solutions provider GDS and a tie-up between AirTrunk and ByteDance to develop new data center projects in Singapore.

There were more than 70 operational data centers in Singapore, as of January 2022. The city-state still accounts for 60% of Southeast Asia’s total data center capacity.

Singapore emerged third globally and first in Asia Pacific in terms of data center market rankings, according to a report by Cushman and Wakefield. Northern Virginia and Portland in the U.S. tied for first while Hong Kong comes in at fourth.

“Demand for data centers in Singapore will remain high with the rapid growth of digital apps, e-commerce, internet of things, artificial intelligence, crypto-trading, blockchain activities, online gaming, etc. The shift to hybrid working and business digitalization has also contributed to the demand for data center space,” said International Trade Administration in a report.