Nvidia Faces Uncomfortable Reality: Its Old Chips Won't Retire Soon

Nvidia's data center business has seen explosive growth over the past two years, jumping from $47.5 billion in fiscal 2024 to $193.7 billion in fiscal 2026. However, a closer look at how its biggest customers depreciate their servers reveals that nearly all of this hardware will still be operational by 2028.

Microsoft and Alphabet generally assume a depreciation period of five or six years for their servers and network equipment. Meta Platforms took it up to 5.5 years in 2025, which added $1.00 to its earnings per share that year. In contrast, Amazon cut the estimated life of a subset of its servers back to five years due to 'the increased pace of technology development, particularly in the area of artificial intelligence and machine learning.'

This has significant implications for Nvidia's growth prospects. The company is counting on a 70% increase in revenue by fiscal 2028, which will be largely driven by new capacity rather than replacement demand. A chip that stays productive is essentially paid-off capacity competing with whatever the company wants to sell next.