Nvidia's AI Supply Chain Commitments Top $279 Billion
Nvidia's latest earnings report revealed that the company is expecting around 70% revenue growth in CY27, but supply constraints are still a major concern. To address this issue, Nvidia has made significant supply commitments totaling $279B, with a large portion of these commitments tied to memory, particularly High-Bandwidth Memory (HBM).
According to Citi, HBM represents the majority of these commitments and is already affecting Nvidia's margins due to rising prices. However, this indicates strong evidence of supplier pricing power rather than weak demand.
The report highlights several key areas where Nvidia's supply chain commitments are concentrated, including Networking and Optics, Advanced Packaging, and Wafers, CoWoS, and substrates. Citi noted that advanced packaging capacity is crucial for the Rubin ramp, with TSMC/CoWoS being a clear exposure.
Nvidia's management estimates that a 1GW Vera Rubin-based AI factory could represent roughly $40B of compute, networking, CPU, and other infrastructure content, supporting power and data-center infrastructure. The company expects margins to fall to 74% in Q3 and bottom at 71-72% in Q4 before recovering to 72-73% after price increases in FQ1 2028.
The report concludes that when 70% growth is still supply-constrained, the most attractive beneficiaries are not every AI-related stock but rather the bottlenecks Nvidia is willing to lock up hundreds of billions of dollars in advance, and still worries may not be enough.