- Thesis
- The market prices Nvidia at a discount because some of its huge revenue growth may not be fully organic. Large buyers use debt, or financing Nvidia itself provides, to pay for chips. This makes some demand look circular, meaning Nvidia's own money may be funding purchases of its own chips. The Department of Justice is also checking whether Nvidia structured a license deal with AI startup Groq to avoid normal antitrust review. Nvidia also cut its near-termexpects a lower gross margin outlook,. It guided the next quarter to about 74% next quarter, down from 75%, and its finance chief said that the margin will be lowest, at 71% to 72%, in the quarter after, down from 75% that. For the gap to close, revenue growth must keep coming from many customers, not just financed ones. The new Vera Rubin chip platform must also keep shipping widely. The Groq inquiry must end without a forced change to the deal, and gross margin must stop falling. The next test is Nvidia's fiscal Q3 earnings call, expected in mid to late November 2026. A Justice Department decision could take longer, likely into 2027. If demand and margins hold up over the next two to three quarters, the gap can close.
- Risks
- Nvidia first planned to invest up to $100 billion in OpenAI, to help fund OpenAI's purchase of Nvidia chips for a 10-gigawatt data center buildout. Its final investmentIn February 2026, Nvidia invested $30 billion in OpenAI's 2026 funding round was. Nvidia also guarantees up to $30105 billion of lease and power payments for an OpenAI data center campus in Ohio. This kind of vendor financing ties Nvidia's future revenue to the financial health of one customer. It makes some reported demand harder to separate from organic demand.
Google, Amazon, and Microsoft each build their own AI chips. Custom AI chipThe research company TrendForce expects shipments are growingof these custom chips to grow 44.6% in 2026, faster than Nvidia's own GPU shipmentsthe 16. Analysts expect these1% it expects for GPUs. If this continues, custom chips to takewill do a growing share of AI work that currentlynow runs on Nvidia GPUs.
Nvidia lowered its near-termexpects a lower gross margin outlook, to: about 74% next quarterin Q3 fiscal 2027 and 71%- to 72% the quarter afterin Q4, down from 75% in the quarter just reportedQ2. This shows rising costs are starting to weigh onThe finance chief said that higher memory prices cause this. Costs that increase faster than prices can decrease profit even as, although revenue keeps growingcontinues to grow fast.
Nvidia's near-term outlook excludes China data center revenue, after a year of shifting US export rules for its chips. TheIn September 2026, press reports said that the Department of Justice opened an antitrust probe in September 2026 intois checking whether Nvidia structured its $20 billion license deal with AI startup Groq to avoid normal antitrust review. Both issues add regulatory uncertainty to Nvidia's growth path.
- Balance sheet
- Cash: $56.6B
Debt: $33.5B
Net cash: $23.1B
Interest cover: 357356×
Debt due within 12 months: $1.0B
Ratings: Moody's Aa1 (positive outlook), S&P AA (stable outlook)
Nvidia holds much more cash than debt, but the balance sheet does not show its largest calls on cash. These are $279 billion of supply and capacity commitments and $5147.29 billion of stakes in private companies. Cash includes marketable debt securities, but not $42.8 billion of listed equity securities. Debt is senior unsecured notes at the parent, and it does not include $5.5 billion of operating lease liabilities. The notes increased in June 2026, when Nvidia issued $25.0 billion in seven tranches. $1714.50 billion of these new notes falls due after five years. Interest cover is operating income divided by interest expense for the first half of fiscal 2027. The $25.0 billion commercial paper program was unused. Moody's affirmedS&P raised its rating to AA in June 2026. In August 2026, after the Ohio guarantee, Moody's and S&P raised its rating in June 2026affirmed their ratings. Nvidia also guarantees part of the lease and power payments for an OpenAI data center campus in Ohio, capped at $105 billion and starting from fiscal 2029. OpenAI must pay back any amount Nvidia pays. The cash and cash flow give room to keep buying back shares ($39.8 billion in the first half of fiscal 2027) and to invest. But the guarantees tie part of its future risk to the credit of one customer.
As of 2026-07-26.
- Recent events
- 2026-10-02: The Financial Times reported that Amazon is in talks to move about $8 billion of Nvidia Grace Blackwell chips into a separate company that borrows money, and to lease the chips back. These are talks only, and neither company made a comment.
2026-09-28: Nvidia raised its share repurchase authorization by $150 billion. The total remaining authorization is now $235 billion, to be used through fiscal 2028.
2026-09-09: The New York Times reported that the US Department of Justice beganis looking into whether Nvidia structured its $20 billion license deal with AI chip startup Groq to avoid antitrust review. Reports put the deal at about $17 billion to $20 billion. The deal gave Nvidia a non-exclusive license to Groq's chip technology., and Nvidia also hired several Groq staff, including founder Jonathan Ross. The Department of Justice did not confirm the inquiry.
2026-09-03: Nvidia agreed to buy AI model platform Hugging Face for about $11.9 billion, plus up to $1.0 billion of retention awards for staff. Nvidia expects the deal to close in the first half of 2027, after regulatory approvals.
2026-08-26: Nvidia reported Q2 fiscal 2027 results. Revenue was $96.2 billion, up 106% from last year. Data center revenue was $89.0 billion, up 117% from last year. Gross margin was 75.0%.
2026-08-26: On its Q2Nvidia guided Q3 fiscal 2027 earnings callrevenue to $108.0 billion, Nvidia guided next-quarterplus or minus 2%, and gross margin to about 74%. It guidedOn the quarter afterearnings call, the finance chief said that tohigher memory costs will make the gross margin lowest in Q4, at 71%- to 72%, downand that it will then be 72% to 73% in fiscal 2028. The outlook includes no data center revenue from 75China.
2026-08-26: Nvidia said that it started production shipments of the Vera Rubin platform in August 2026. It expects Vera Rubin to be about 20% of data center revenue in Q3 fiscal 2027.
2026-08-17: Nvidia agreed to guarantee part of the quarter just reportedlease and power payments for an OpenAI data center campus in Pike County, Ohio, of about 4.25 gigawatts. The guarantees go to the landlord, SB Energy, are capped at $105 billion, and start with the first lease phase in fiscal 2029. OpenAI must pay Nvidia back for any amount Nvidia pays.
2025-09-22: Nvidia and OpenAI announcedsigned a partnershipletter of intent. Nvidia will invest up to $100 billion in OpenAI to help deploy, step by step, as OpenAI deploys at least 10 gigawatts of Nvidia systems.