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Semiconductor stocks, like Nvidia (NVDA), are among Wall Street’s favorites. The world’s most valuable chipmaker reports earnings after the bell on Wednesday, May 28. While the company has outperformed the S&P 500 (^GSPC) year-over-year, it has underperformed year to date as trade tensions create headwinds. Environmentalists, however, are concerned about more than just trade risks. The climate risks created by the chipmakers powering the AI boom are worrisome too.
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This is Yahoo Finance. I'm executive editor Brian Sozzi and also the host of the opening big podcast. One of your favorite companies from the magnificent seven, of course, that's Nvidia, reports earnings this week and how the numbers shake out could dictate the next big move in the AI trade. Wall Street analysts are predicting another positive quarter of earnings growth fueled by demand for all things AI, but while Wall Street's feeling bullish, environmentalists have their concerns. And here's why. Nvidia is the world's most powerful chip maker with a market cap of more than 3 trillion dollars. But behind Nvidia's record revenues and profits is an overlooked cost. The environmental impact of chips powering the big AI boom. Nvidia holds about 80% of the AI chip market. Their GPUs or graphics processing units power things like ChatGPT, autonomous vehicles, and of course, video game graphics. The company designs the chips, then outsources manufacturing to foundries, also called fabs. The bulk of AI chip making happens in East Asia, and that's where energy use is absolutely surging. Fabs are energy intensive, and they're mostly powered by fossil fuels. For example, in Taiwan, over 80% of electricity still comes from coal, oil, and gas. Electricity use from AI chip making jumped more than 350% between 2023 and 2024, according to a recent report from Greenpeace East Asia. In Taiwan alone, the industry now consumes as much electricity as 93,000 Taiwanese households, says Greenpeace. Global electricity demand for AI chip making is estimated to reach nearly 40,000 gigawatt hours by 2030. That's more than the current total of Ireland's electricity consumption. And by 2027, AI electricity needs could be comparable to the current total of Argentina's electricity consumption, according to a recent study by the New York Times. Google, also a mag 7 member along with Nvidia, has said it will likely miss its climate targets due to increasing power demands of training AI models. The world's AI future is being built chip by chip, but as the industry scales, so does its environmental footprint. Keep that in mind as you read Nvidia's financial statements and earnings call later this week. With those profits, there is a cost.