Nvidia reported results for the first quarter of fiscal 2027 (Q1 FY27): revenue was $81.6 billion, an 85 percent year‑over‑year increase. The Data Center segment accounted for 92 percent of revenue with $75.2 billion. Net income tripled to $58.3 billion. Networking revenue also tripled. The company handily beat every estimate, yet the stock fell by roughly 1 percent after the release. This marks the third consecutive quarter in which beats were followed by a post‑earnings drop.
Why these figures matter
Investors have increasingly been valuing Nvidia not just on current earnings but on the expectation that it will dominate the entire AI stack. Several structural issues highlighted alongside the quarter’s results suggest that this ‘inevitability’ thesis has vulnerabilities.
Upstream: HBM supply concentration and rising prices
- The HBM (High Bandwidth Memory) market is effectively controlled by three manufacturers: SK Hynix, Samsung and Micron, which the report says supply 100 percent of HBM.
- The price of HBM3E rose from $500 to $1,200 over an 18‑month period.
- According to the same reporting, an additional 30–50 percent price increase has already been booked for this quarter.
Those supply‑side constraints and rapid price inflation put pressure on costs and capacity, which could constrain GPU deployment even amid strong demand.
Downstream: major AI customers building alternatives
Some of Nvidia’s largest growth drivers are actively diversifying away from dependence on Nvidia hardware:
- OpenAI reportedly signed a three‑year, $20 billion deal with Cerebras Systems and took a 10 percent equity stake in the company.
- Anthropic engineers are reportedly embedded at Amazon’s Annapurna Labs on a daily basis, influencing design decisions for Trainium 3 and Trainium 4.
Nvidia has also invested heavily in these partners — reportedly $30 billion in OpenAI and $10 billion in Anthropic — in part to keep them aligned with Nvidia. The critique is that these investments have provided capital while some partners simultaneously build internal alternatives.
Bottom line
Q1 FY27 produced extraordinary top‑line and profit growth, led by the Data Center business. Yet the combination of concentrated HBM supply with rapid price inflation, and the largest AI customers actively creating substitute hardware pathways, suggests that the market’s pricing of Nvidia’s ‘inevitability’ may be optimistic. The central question now is how quickly these gaps widen and whether they will eventually compress the valuation multiple the market has granted Nvidia.
