As Nvidia prepares to release its quarterly results on February 25th, investor attention is fixed on a single, striking metric. The AI chip leader’s inventory has ballooned to an unprecedented $19.7 billion. This surge has ignited a debate among market strategists: does this signal a looming oversupply, or is it merely a strategic buildup for the company’s next-generation product transition?
Diverging Interpretations of Soaring Stockpiles
According to data from TipRanks, Nvidia’s days of inventory have climbed to 105, a figure that sits significantly above its three-year average. Some analysts interpret this as a potential warning sign that the severe shortage which allowed for premium pricing for years may be easing. They caution that this development could, over the long term, exert pressure on Nvidia’s impressive gross margin, which stands at approximately 75%.
However, an alternative reading of the situation exists. The substantial inventory accumulation could simply reflect the company’s preparation for the launch of its new Blackwell architecture. In this view, Nvidia is building capacity to ensure a smooth ramp-up for its next-generation products, rather than facing a fundamental drop in demand.
Wall Street Maintains a Bullish Stance
Despite the elevated inventory levels, prominent financial institutions retain their confidence. Investment bank Bernstein reaffirmed its positive outlook, stating that “growth in the AI sector continues to have momentum.” Goldman Sachs analysts are even more optimistic, projecting a revenue beat of $2 billion. They forecast fourth-quarter fiscal 2026 revenue of roughly $67.3 billion, compared to Nvidia’s own guidance of approximately $65 billion.
This confidence is largely fueled by the colossal capital expenditure plans of major cloud providers, Nvidia’s primary customers:
* Amazon has outlined plans for investments nearing $200 billion by 2026.
* Alphabet has budgeted for capital expenditures of up to $185 billion.
* Microsoft continues to aggressively expand its AI infrastructure.
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These investments underscore a pivotal shift in Nvidia’s business: nearly 90% of its revenue now originates from its data center segment, with the legacy gaming business taking a secondary role.
Potential Tariff Relief on the Horizon
A potential positive development may emerge from U.S. trade policy. Reports from the Financial Times suggest the Trump administration is considering exempting major technology firms, including Amazon, Microsoft, and Google, from import tariffs on chips. This exemption would be contingent on the chips being used for AI projects within the United States. The Commerce Department would oversee the rule, which would also be linked to investment commitments from TSMC, which is investing about $165 billion in new semiconductor fabrication plants in Arizona.
Strategic Prioritization: AI Over Gaming
Nvidia is making a deliberate strategic choice in response to ongoing supply constraints for high-bandwidth memory. The company is prioritizing resources for its AI-focused Blackwell chips over consumer-grade graphics cards. The data center business commands substantially higher margins and sits at the very core of Nvidia’s growth strategy.
All eyes will be on the upcoming earnings report for the fiscal fourth quarter, which ended on January 26, 2026. While the expected gross margin remains around 75%, whether the record inventory level threatens this benchmark in the medium term is poised to be a key topic during the analyst conference call.
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