Nvidia CEO Jensen Huang on Wednesday defended the company’s decision to “rip the Band-Aid off” on gross margins, saying the chip giant deliberately reset Wall Street expectations after absorbing higher production costs across its supply chain. In an interview with FOX Business anchor Liz Claman set to air Thursday on “The Claman Countdown,” Huang said Nvidia’s gross margins will decline from 75% to between 72% and 73% next year — a move he framed as removing the “anxiety” investors had about margin pressure.
“This quarter we decided that we would rip the Band-Aid off, reset expectations about our gross margins, and just explain to people that in fact, we have now absorbed the cost increases,” Huang said. “We have also repriced our products in the marketplace, and based on that, our margins are going to come down from 75%. But it will be between 72% and 73% next year.”
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The comments followed Nvidia’s blowout fiscal second-quarter earnings report released after the market close Wednesday, which eased concerns that the AI boom is losing momentum. The company beat Wall Street expectations and offered a strong revenue outlook for the next fiscal year, sending shares up 4% in after-hours trading.
What’s driving the margin reset
Nvidia, now valued at roughly $5 trillion, expects revenue to surpass $96 billion in the second quarter of fiscal 2027. The margin guidance reflects rising costs tied to advanced packaging, memory components, and the complex supply chain required to produce its flagship AI accelerators.
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The company’s decision to absorb cost increases rather than immediately pass them all to customers marks a notable shift in strategy. Huang’s framing suggests Nvidia is prioritizing long-term customer relationships and market share over short-term profitability — a calculation that carries risk if AI infrastructure spending slows more sharply than expected.
Analysts have been watching Nvidia’s margins closely as a barometer for pricing power in the AI chip market. The forecast of 72% to 73% gross margins remains exceptionally high by semiconductor industry standards, where gross margins in the 50% to 60% range are more typical. Even with the decline, Nvidia’s profitability profile continues to outpace most peers.
Job creation and the skilled labor shortage
Beyond margins, Huang touted Nvidia’s role in driving employment across the tech sector. The company employs roughly 42,000 people worldwide, and Huang said the AI buildout is creating jobs far beyond Nvidia’s own payroll.
“We’re creating more jobs than ever,” Huang said. “We’re creating jobs in chip plants, packaging plants, computer plants, and of course, all of these AI data centers.”
Huang acknowledged that the demand for skilled workers continues to outpace supply. “There’s just not enough skilled labor around the world and surely not here in the United States to be able to support my entire demand. But we have enough support for the 70% that I’ve forecasted,” he added.
The labor shortage has become a recurring theme in the AI infrastructure buildout, with companies across the semiconductor supply chain competing for engineers, technicians, and data center operators. Nvidia’s expansion has ripple effects through the broader economy, from construction of fabrication plants to the assembly of server racks.
What this means for investors
The margin reset comes at a critical moment for Nvidia, which has seen its valuation climb to roughly $5 trillion as demand for AI training and inference chips continues to surge. The company’s guidance suggests management sees enough demand visibility to absorb cost increases while maintaining sturdy revenue growth.
Investors will likely parse Huang’s comments for signals about pricing strategy and competitive positioning. Rivals including AMD and a growing list of custom silicon designers have been competing for AI workloads, though Nvidia’s CUDA software ecosystem and full-stack approach continue to provide a moat.
The company’s job creation claims also carry political weight, as policymakers debate the domestic semiconductor manufacturing buildout and AI’s impact on employment. Huang has previously argued that AI will reshape work similarly to the Industrial Revolution, and that the U.S. “should absolutely lead” in AI development.
Huang’s full interview airs Thursday at 3 p.m. ET on “The Claman Countdown.”
This article is for informational purposes only and does not constitute financial advice. The cryptocurrency and technology markets are volatile, and investors should conduct their own research before making investment decisions.
