Nvidia Cuts Margin Outlook Amid Surging Memory Prices

Nvidia has cut its gross-margin outlook due to rising memory-chip prices and supply-chain bottlenecks. The company expects gross margin to be around 74% in the third quarter, down from 75% in the second quarter. Gross margin is projected to fall further to 71-72% in the fourth quarter.

The impact of higher memory prices is expected to weigh on profitability, with Nvidia expecting the cost to become more visible in fiscal 2028. The company is discussing capacity expansion with Samsung Electronics, SK hynix, and Micron Technology.

Nvidia's revenue growth is also being affected by custom chip development by major customers, including Google, Amazon Web Services (AWS), Anthropic, and OpenAI. These companies are designing application-specific integrated circuits (ASICs) optimized for their AI workloads.

Despite this, Nvidia expects its fiscal 2028 revenue to grow about 70% from the previous year, while actual demand is higher. Demand growth next year is expected to reach 100%. The five largest hyperscalers are expected to spend nearly $800 billion on capital expenditure this year and $1.3 trillion next year.

AWS will deploy an additional 2 million Nvidia graphics processing units (GPUs), while OpenAI plans to deploy 12 gigawatts (GW) of AI infrastructure using Nvidia products by 2030. Addressing concerns over circular financing, Nvidia said OpenAI will grow into the largest technology company in history.