This Operating Metric Is Going to Make or Break Nvidia Stock on May 28

Core Viewpoint - Nvidia's upcoming fiscal first-quarter results are highly anticipated, but investors should focus on underlying operating metrics rather than just headline sales and earnings per share figures [1][2][3] Company Overview - Nvidia has transformed from a $360 billion tech company into a $3.3 trillion leader in the AI sector, primarily known for its GPUs used in gaming and cryptocurrency mining [5] - The company's Hopper (H100) and Blackwell GPUs are critical for AI-accelerated data centers, dominating the market [6] Supply and Demand Dynamics - Nvidia's success is driven by high demand for AI-focused GPUs, which are currently in short supply despite increased production capacity from Taiwan Semiconductor Manufacturing [7] - The company has been able to raise prices significantly, charging two to four times more per chip than competitors, positively impacting sales and profits [8] Innovation and Competition - Nvidia's CEO aims to release more powerful and energy-efficient chips annually through 2027, maintaining a competitive edge in compute capabilities [9] - However, increasing competition from both external rivals and internal customer developments of AI-GPUs poses a threat to Nvidia's market position [17] Financial Metrics - Nvidia's GAAP gross margin peaked at 78.4% in Q1 2025, driven by high chip prices, but is projected to decline to 70.6% in Q1 2026 [13][20] - Despite the decline, a gross margin of 70.6% remains significantly higher than pre-AI boom levels, indicating strong sales performance [15] Future Outlook - The trend of declining GAAP gross margin raises concerns about Nvidia's pricing power and market share as competition increases [18] - The upcoming fiscal first-quarter results will be crucial; a forecast indicating a recovery in gross margin could boost stock performance, while continued declines may lead to further stock price drops [19]