Quick Summary Nvidia posted a 75.2% adjusted gross margin , among the highest in Big Tech AI hyperscalers plan US$650B capex in 2026 , much flowing to Nvidia Rivals like AMD, Alphabet and Amazon are gaining traction Long-term margin sustainability remains the key investor question Margins Steal the Show While investors already expected strong demand, NVIDIA Corp surprised with something even more impressive: Adjusted gross margin of 75.2% , the highest since late 2024 — and management expects similar levels next quarter. For a nearly US$5 trillion company , that margin signals extraordinary pricing power in AI hardware. AI Spending Wave Still Intact AI hyperscalers are forecasting ~US$650 billion in capex for 2026 , up roughly 60% from 2025. Nvidia remains the primary beneficiary as demand for data centre GPUs continues to surge. But maintaining 75% margins depends on two big factors: 1️⃣ Supply Constraints Rising memory costs remain a ris...
Quick Summary
Nvidia posted a 75.2% adjusted gross margin, among the highest in Big Tech
AI hyperscalers plan US$650B capex in 2026, much flowing to Nvidia
Rivals like AMD, Alphabet and Amazon are gaining traction
Long-term margin sustainability remains the key investor question
Margins Steal the Show
While investors already expected strong demand, NVIDIA Corp surprised with something even more impressive:
Adjusted gross margin of 75.2%, the highest since late 2024 — and management expects similar levels next quarter.
For a nearly US$5 trillion company, that margin signals extraordinary pricing power in AI hardware.
AI Spending Wave Still Intact
AI hyperscalers are forecasting ~US$650 billion in capex for 2026, up roughly 60% from 2025. Nvidia remains the primary beneficiary as demand for data centre GPUs continues to surge.
But maintaining 75% margins depends on two big factors:
1️⃣ Supply Constraints
Rising memory costs remain a risk
CFO Colette Kress said Nvidia has secured inventory, but supply tightness may persist through 2027
2️⃣ Growing Competition
Competitors Smell Opportunity
As Jeff Bezos famously said:
“Your margin is my opportunity.”
That logic now applies squarely to Nvidia.
Advanced Micro Devices Inc (AMD)
Announced a “double-digit billions” deal with Meta Platforms Inc
Targeting data centre processors — Nvidia’s core turf
Alphabet Inc.
Expanding internal Tensor Processing Units (TPUs)
TPU average price: US$8,000–10,000
Nvidia H100: US$23,000+
Blackwell system: US$27,000+
Amazon.com Inc.
Promoting its own AI chips
Secured Anthropic as a client
Price differentials are becoming harder to ignore.
Huang’s Defense: Innovation = Margin
CEO Jensen Huang argues Nvidia’s moat lies in:
Broader GPU functionality (training + inference)
Energy efficiency improvements
Continuous “generational leaps” in AI performance
His core message:
“The single most important lever of our gross margins is delivering generational leaps.”
The Bigger Risk: ROI for Hyperscalers
More than half of Nvidia’s US$62.3B data centre revenue comes from hyperscalers.
But here’s the key concern:
AI infrastructure spending is exploding
Monetisation is still catching up
If ROI disappoints, hyperscalers may push harder toward cheaper alternatives
If compute doesn’t translate into revenue fast enough, Nvidia’s 75% margin becomes vulnerable.
Bottom Line
Nvidia’s 75% margin is both a strength and a target.
It proves Nvidia’s dominance in AI infrastructure — but it also invites competitors to undercut pricing and capture market share.
The real test isn’t demand.
It’s whether AI customers generate enough returns to keep paying Nvidia’s premium.
Key Takeaways
75% margin highlights extraordinary pricing power
US$650B AI capex supports near-term demand
AMD, Alphabet, and Amazon building credible alternatives
Long-term margin durability depends on AI monetisation
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