EXCLUSIVE: Nvidia Keeps AI Profits, TSMC May Want a Bigger Cut
Key takeaways
- Nvidia’s AI profits are strong, but foundries like TSMC may soon capture a larger share of the value as manufacturing capacity becomes a tighter bottleneck.
- Nvidia gross margin 71.1% (fiscal 2026)
- Nvidia relies on TSMC and Intel for manufacturing
- Kaplan highlights potential shift in profit pool from designers to manufacturers
What happened
Nvidia Corp (NVDA) reported a 71.1% gross margin for fiscal 2026, highlighting its strong profitability in the AI chip market, while its designs are manufactured by foundries such as Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) and Intel Corp.. Josh Kaplan, head of Research & Investment Strategy at MarketVector, warned that as AI demand pushes foundries to expand capacity, the economic profits that have largely flowed to chip designers like Nvidia could shift toward the manufacturers…
Why it matters
Nvidia’s high margins have been a key driver of the AI boom, but the company’s reliance on foundries means that any shift in manufacturing leverage could redistribute value within the semiconductor supply chain. If TSMC and other foundries gain more pricing power, the profitability landscape for AI chip designers may…
Short-term and longer-term
Short-term. Traders should monitor Nvidia’s gross margin trend and any changes in its cost of goods sold, as well as TSMC’s capacity expansion plans and pricing moves.
Longer-term. Investors should assess whether Nvidia’s high margins are sustainable if foundries begin to capture more value.