Nvidia's Declining Margins Benefit Micron as Memory Costs Rise
In its Q2 2027 earnings call, Nvidia CFO Colette Kress highlighted strong revenue growth and demand for AI accelerators but warned of declining gross margins due to rising memory prices. Gross margin is expected to fall from a peak of 75% in the current quarter down to as low as 71%-72% by Q4 before recovering slightly in fiscal 2028. The drop reflects higher costs for high-bandwidth memory, which now accounts for up to 40% of AI chip production costs. The increased demand and limited supply are benefiting key suppliers like Micron, SK Hynix, and Samsung—three companies that control the global market for this specialized memory. These firms have announced plans to expand manufacturing capacity over the next few years but cannot immediately meet current demand. Nvidia is working closely with these partners to secure long-term supplies. Kress noted that while higher prices are being negotiated now, they will not fully impact gross margins until early fiscal 2028 when pricing increases pass through to revenue. Meanwhile, sales of older-generation chips in China have had a dilutive effect on overall profitability.
Topics: AI gross margin revenue growth semiconductors