Semiconductor Market Rebound Seen in Nvidia's Figures

That projects a further 62.5% increase in capital spending over the coming year.

Nvidia has broken out its data center revenue into hyperscaler and ACI (AI Cloud Industry Enterprise) segments. The AI Cloud Industry segment in particular posted record growth of 25% quarter-on-quarter and 138% year-on-year, leading overall data center revenue growth.

ACI refers to dedicated AI clouds rather than general-purpose clouds, showing that demand for AI-specialized cloud services is surging alongside advances in artificial intelligence. This structural shift is expected to have a positive effect not only on Nvidia but on the related semiconductor industry as a whole.

Nvidia has moved from its previous cycle of unveiling new products every two years to launching new products every year. This change is expected to allow old and new products to be sold simultaneously, further stabilizing revenue growth.

With a new product reaching the market each year, analysts expect new products to quickly offset declines in sales of existing ones, enabling sustained revenue growth. This is viewed as an important change that secures Nvidia's long-term growth engine.

The temporary decline in Nvidia's operating cash flow is attributed to rising accounts receivable and inventory. This quarter, receivables grew to $22.3 billion and inventory rose by $5.8 billion. Increases in prepayments and other assets also reached $5.5 billion.

This drop in cash flow is attributed not to weaker demand but to preparation for new products such as the upcoming 'Vera Rubin' and proactive spending ahead of rising memory prices. In other words, it can be read as a sign that Nvidia is expanding strategic investment to support future revenue growth.

Rising receivables mean payment for products sold has not yet been received, while rising inventory shows that Nvidia is securing products to sell in the future. While this may weigh on short-term cash flow, it can be seen as a positive indicator reflecting strong demand and growth prospects over the long term.

The recent sharp rise in memory chip prices could push up Nvidia's product costs and cause a temporary margin decline. Analysts say Nvidia is under margin pressure even after raising its own product prices.

However, Nvidia holds strong pricing power, backed by its market dominance and technology, enabling it to pass memory price increases on to customers. Thanks to this competitive edge, Nvidia is expected to raise product prices further in fiscal 2028 and restore its margins.

This suggests that the negative impact of rising memory chip prices on Nvidia's profitability will be limited, and that Nvidia can maintain stable margins over the long term. In the end, rising memory prices could highlight Nvidia's pricing power even more.