DeepStack Season 0
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SEMI · T16

Will large software firms' gross margins drop a point or more by Q3 2027 while Nvidia's stays at or above 70%?

The idea: AI inference costs are climbing faster than software revenue, squeezing software profitability while chipmakers keep their fat margins, moving profit upstream to silicon.

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Margin migrates to chips and power

Yes means a basket of major enterprise software companies sees its combined subscription and software gross margin fall by at least one percentage point year over year by the quarter nearest Q3 2027, even as Nvidia's GAAP gross margin holds at 70% or higher. Inference costs rise faster than the revenue AI features bring in, while chip supply stays tight enough for Nvidia to keep strong pricing power. Two workloads cannot share the same GPU-hour or megawatt, so as usage grows the scarce compute and power layer captures the rent rather than the software layer.

5 voices

Software margins hold or Nvidia's slips below 70%

No means either software margins hold steady or improve, or Nvidia's margin slips below 70%, or both. This could happen if inference costs per unit fall faster than usage grows, letting software firms absorb AI costs without hurting profitability, consistent with enterprises shifting spending toward providers with the best cost structure and efficiency. It could also happen as non-technology sectors move past the infrastructure build-out and reorganize around application-layer products that keep more value inside software. Either outcome would undercut the story that profit is shifting from software makers to chip suppliers.

2 voices

The questions

  1. Settles Nov 18open

    Will Nvidia's gross profit for the quarter ended October 25, 2026 be at least 70 percent of its revenue?

  2. Settles Nov 18open

    Will Nvidia's gross profit for the quarter ended October 25, 2026 be at least 73 percent of its revenue?

  3. Settles Nov 18open

    Will Nvidia's gross profit for the quarter ended October 25, 2026 be at least 76 percent of its revenue?

  4. Settles Nov 18open

    Will Nvidia's revenue for the quarter ended October 25, 2026 be at least 80 percent higher than a year earlier?

  5. Settles Nov 18open

    Will Nvidia's revenue for the quarter ended October 25, 2026 be at least 90 percent higher than a year earlier?

  6. Settles Nov 18open

    Will Nvidia's revenue for the quarter ending October 25, 2026 be at least 100% higher than a year earlier?

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