Is the Party Over for Nvidia on Feb. 26? One Figure Provides a Clear Answer.

Core Viewpoint - The sustainability of Nvidia's significant stock price increase is contingent upon its operating performance, particularly its gross profit margin, as it faces increasing competition and potential pricing pressures in the AI-GPU market [1][10][17] Group 1: Market Context - The AI revolution has been a major catalyst for Wall Street's stock market performance, with an estimated addressable market of $15.7 trillion by 2030 [2] - Nvidia has emerged as a leading beneficiary of this trend, gaining nearly $3 trillion in market value since the end of 2022 [3][5] Group 2: Nvidia's Market Position - Nvidia holds a dominant position in the AI-accelerated data center market, accounting for 98% of GPUs shipped to enterprise data centers in 2022 and 2023 [5] - The company has experienced significant demand for its Hopper chip, commanding prices upwards of $40,000, compared to competitors like AMD, which sell their chips for $10,000 to $15,000 [6] Group 3: Competitive Landscape - Nvidia's CUDA software platform has been crucial in maintaining customer loyalty and maximizing the utility of its GPUs [7] - High-profile orders from major companies validate Nvidia's hardware as the preferred choice in the market [8] Group 4: Financial Performance Indicators - Nvidia's revenue for fiscal 2023 was $27 billion, with projections suggesting it could exceed $200 billion in three years [10] - The company's GAAP gross margin peaked at 78.4% in the fiscal first quarter of 2025 but has been declining, with expectations of 73% for the fiscal fourth quarter [12][13] Group 5: Future Challenges - The decline in gross margin indicates increasing competition, particularly from AMD and other companies developing their own AI chips, which could impact Nvidia's pricing power [14][15] - There is a risk that customers may opt for lower-margin AI chips, which could further affect Nvidia's gross margin outlook for fiscal 2026 [16]