Nvidia's High Margins Hide a Price Cut

Ben Thompson, a technology commentator who writes about Big Tech, argues that Nvidia's position under Jensen Huang, Nvidia's chief executive, is "definitely unnatural." Rivals are coming for the company, yet in 2026 it is still charging high prices for chips and reporting high margins. Thompson argues those margins do not tell the whole story.

What looks like pricing power, he says, is being protected by circular financing. In one arrangement he describes, Nvidia provides a 25 percent backstop and takes equity in the so-called neoclouds, the smaller cloud companies that buy chips to rent out computing power. Those companies in turn guarantee they will buy computing power through 2030.

The guarantee lets the buyer borrow more cheaply and buy more because Nvidia has assumed the risk: "Risk never disappears. It just appears somewhere else."

As Thompson puts it, "Taking on risk has a price," even if accountants do not record it as a discount. He acknowledges one possible future in which AI demand never stops and Nvidia captures all the upside of its bets. But, he says, there is also a future in which a neocloud stumbles, unwanted computing power floods the market, and Nvidia is left paying for capacity no one wants.

In that second case, the investment is worth much less than Nvidia paid. The expected value of that investment, he says, is not zero and not 100 percent, but somewhere in the middle. That gap, he argues, reduces profitability on a holistic view. "What that is, is a price cut."

The cut simply does not appear in the reported margin. Thompson says Nvidia's dealmaking focuses on asking how it can "maintain our margins," even if a fuller accounting of risk would show lower profit. Shifting obligations away from its own books generally succeeds, he adds, but the price cuts have already arrived, just in strange forms.