Nvidia AI Revenue Limited by Chip Shortages
Nvidia executives state semiconductor supply shortages, especially for high-speed memory, are limiting the company's AI revenue growth for its next fiscal
Nvidia's financial outlook is being weighed down by semiconductor supply constraints. The shortages span the company's entire supply network, from memory and silicon vendors to suppliers building AI data centers, co-founder and CEO Jen-Hsun Huang told investors on an August 26 earnings call.
Supply constraints have plagued many technology vendors as the build-out of AI data centers outpaces semiconductor supply. This has led companies like Dell Technologies and Hewlett Packard Enterprise to compete for more chips and extend server wait times. Nvidia's customers include major organizations constructing AI data centers, such as Amazon, Google, and Microsoft, as well as national and regional governments.
Supply Shortfall Limits Growth
Huang stated that while Nvidia has secured enough supply to drive 70% year-over-year revenue growth in fiscal 2028, that amount falls short of demand. The company's supply-demand gap is expected to remain a bottleneck at least through the fiscal year ending in early 2028, according to Executive Vice President and CFO Colette Kress.
The semiconductor shortage has also driven up prices. Kress noted extreme pricing conditions in memory. She said the magnitude of the price increase has exceeded prior expectations and are headed even higher into next year. However, Nvidia maintains deep relationships with three major memory suppliers and is working closely with them to increase capacity.
Escalating Supply Commitments
To manage the constraints, Nvidia has partnered with suppliers to secure critical components for the next several years. The company's financial commitments for supply have increased dramatically, according to a securities filing.
| Reporting Period | Supply Commitments |
|---|---|
| First Quarter | $119 billion |
| Period ended July 26 | $279 billion |
Aligning with Data Center Builders
Dealing with the shortages has pushed Nvidia to look beyond simply securing components for its own products. Huang explained that the company is now aligning its supply chain with the networks feeding AI data center construction. This provides more visibility into the timing of customers' future needs. Huang referenced data center customers, stating they really need an entire factory platform built for them.
The company continues to work through its extensive supply chain to meet the surging demand for AI infrastructure.
