Nvidia's AI Growth May Come at a Higher Price

Nvidia's dominance in the artificial intelligence (AI) chip market has driven enormous revenue growth over time, thanks to its wise bet on developing graphics processing units (GPUs) for AI infrastructure.

The company expects this trend to continue amid high demand, with predictions of $20 billion in stand-alone CPU sales this year and 70% revenue growth for the 2028 fiscal year.

However, Nvidia's finance chief Colette Kress warned that 'extreme pricing conditions in memory' will weigh on profitability, with gross margins expected to bottom at 71-72% in the fourth quarter and settle at 72-73% in the 2028 fiscal year.

This is due to a memory shortage driven by high demand for AI infrastructure, which may continue even as supply increases. Despite this challenge, Nvidia benefits from the demand and has demonstrated its ability to manage higher memory prices.