Nvidia's Growth Pledge Faces a New Kind of Scrutiny: Who's Actually Paying for All Those Chips?

Nvidia's Q2 revenue hit $96.2B, up 126% net income, but supply constraints and antitrust concerns cloud the 70% FY2028 growth forecast.

The numbers were staggering even by Nvidia's own inflated standards. Revenue hit $96.2 billion in the fiscal second quarter — more than double the year-ago figure and comfortably ahead of the $92.3 billion analysts had penciled in. Net income jumped 126% to $59.7 billion. And CFO Colette Kress went one step further, guiding to 70% revenue growth for fiscal 2028 against a consensus that had been sitting at just 45%.

Wall Street responded with conviction. The stock climbed 8.7% on Thursday, its best single-day gain since April 2025, adding $442 billion to the company's market capitalization in one session — the second-largest one-day value creation in market history. In Frankfurt, the shares traded at €194.72, roughly 3.8% below the 52-week high of €202.50. The move helped lift both the S&P 500 and the Nasdaq.

But beneath the headline euphoria sits a more uncomfortable question. The 70% growth forecast is, by Nvidia's own admission, supply-constrained rather than purely demand-driven. CEO Jensen Huang framed the moment as a historic inflection point where AI demand outstrips what the company can physically produce. That framing is doing a lot of work. If growth is being flattered by scarce manufacturing capacity that keeps prices artificially high, the margin structure could look very different once supply catches up.

The Bull Case: Demand Is Broad Enough to Believe

For now, the bulls have plenty of ammunition. The data center business grew 117% to $89 billion, split between hyperscalers at $49 billion and NeoCloud plus enterprise customers at $40 billion. Amazon tripled its order to three million Nvidia chips for delivery starting in 2027. The third-quarter guide of roughly $108 billion in revenue at a 74% gross margin suggests the growth is already locked into the order book rather than aspirational.

At least ten brokerages raised their price targets following the print. Raymond James lifted its target to $515 — which would imply a market capitalization of $12.4 trillion — explicitly citing supply scarcity as the "primary bottleneck." J.P. Morgan set a $320 target, leaning on the supply-driven growth expected for fiscal 2028.

There's also a potential strategic bolt-on in play. Nvidia is reportedly in advanced talks to acquire Hugging Face, the open-source AI model marketplace, for around $12.9 billion. The Information, Ars Technica and Business Insider all reported the discussions, though a deal is far from certain. The price tag would represent roughly 86 times Hugging Face's estimated $150 million in annual revenue — a steep multiple, but one that reflects the platform's strategic value as a distribution channel for open models. Hugging Face was valued at $4.5 billion in 2023, and Nvidia's earlier investment offer of $500 million at a $7 billion valuation was rejected at the time.

A successful acquisition would mark Nvidia's largest-ever deal, dwarfing the $7 billion Mellanox purchase in 2019. It would also extend the company's reach beyond silicon into the software ecosystem, potentially strengthening its hand against closed-system rivals like OpenAI and Anthropic.

The Bear Case: Margins, Antitrust, and the Financing Web

The risks are equally concrete. Gross margin is expected to slip to 71–72% in the fourth quarter on rising memory costs before recovering to 72–73% — an early signal that input cost inflation is starting to bite into profitability.

More troubling is the Wall Street Journal's report that Nvidia has paused its revenue-sharing agreements with AI cloud providers due to internal antitrust concerns. The program, launched in July, helped customers like Sharon AI and Firmus secure credit facilities and supported a $500 billion financing package for OpenAI with $105 billion in guaranteed commitments. A company spokesperson insists the business model remains intact in principle, but the pause reveals how tightly Nvidia's growth is now woven into the financing architecture of its own customers.

That interdependence cuts both ways. If regulators decide the practice constitutes an improper extension of Nvidia's chip dominance into customer financing, the demand side of the equation could take a direct hit. European critics have already raised concerns about neutrality and technological sovereignty should Nvidia come to control Hugging Face, a central platform for open-source models.

There's also the capital allocation question. Nvidia has signaled it will return at least half of its free cash flow to shareholders — around 60% this year — a notable shift that Bank of America suggests could support the stock in a pattern investors recognize from Apple. Last quarter, $26 billion flowed back to shareholders: $20 billion in buybacks and $6 billion in dividends. Evercore analysts project $115 billion in returns this year and $230 billion in 2027.

The contrast with the cash flow trajectory is striking. Free cash flow fell from $49 billion to $21.4 billion in the latest quarter, even as the payout commitment rises. Meanwhile, roughly $15 billion in debt comes due over the next one to five years. The company is effectively promising more cash back to shareholders while its cash generation temporarily compresses and its acquisition ambitions expand.

What Comes Next

The stock's current level sits 7.4% above its 50-day average of €181.34, reflecting genuine confidence in the 70% forecast. As long as data center demand exceeds supply and marquee customers keep expanding orders, that guidance looks achievable. The third-quarter report — with its $108 billion revenue guide already on the table — will be the next concrete test.

The more fragile assumption is that Nvidia's growth rests on organically funded end-customer demand rather than a self-reinforcing loop of Nvidia-financed cloud partners buying Nvidia chips. If that perception shifts, the paused revenue-sharing practice could become more than a footnote. The company is now balancing three competing priorities — feeding insatiable chip demand, financing its customers' infrastructure, and returning record amounts of capital to shareholders. Managing all three simultaneously will require a degree of precision that even Nvidia hasn't yet been forced to demonstrate.