Nvidia’s Chip Prices May Be Losing Their Edge

The latest earnings report from Nvidia showed that the company beat analysts’ forecasts for both revenue and profit. The news caused a quick rise in share price after the market closed, but that excitement disappeared during regular trading hours. The dip may be linked to comments from the chief financial officer about growing inventory levels. For years, demand for Nvidia’s top AI processors has outstripped supply. The firm has struggled to keep up with requests from large cloud providers such as Microsoft, Amazon, Meta and Alphabet. Because the chips were scarce, Nvidia could raise prices and improve its gross margins. The CFO said that inventory increased by 8 percent in the quarter and that the company has enough stock and future orders to meet demand through 2027. While having a clearer view of the future is normally reassuring, investors worry that a more balanced supply‑demand situation could squeeze Nvidia’s high margins.The company reported a non‑GAAP gross margin of 75. 2 percent for the quarter. Nvidia expects next quarter’s margin to fall between 74. 5 and 75. 5 percent, and the full‑year figure to stay in the mid‑70s. Although short‑term margins look steady, a researcher asked CEO Jensen Huang whether the same levels could be maintained after 2027. Huang replied that sustained margins would depend on delivering breakthroughs in performance per watt and performance per dollar that far exceed what Moore’s Law predicts. Many investors are now concerned that Nvidia may already be past the peak of its pricing power for AI chips. The wider semiconductor market is also feeling pressure, as shown by a 3. 5 percent drop in the PHLX Semiconductor Index on the same day. Overall, the company’s strong earnings are tempered by worries that its current advantage may fade as supply catches up with demand.