Thesis · Semiconductors & Compute Silicon

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.

6 dated tests · 0 resolved · next on

The tests More theses in Semiconductors & Compute Silicon

Who is on each side

The two sides.

Each side in DeepStack’s words, then the voices who argue it, attributed and paraphrased, dated where the date is known. A voice links to its page on DeepStack where one exists.

The case for yes

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.

The case for no

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.

5 voices

Margin migrates to chips and power

  1. Conestoga Capital Advisors LLC

    Chipmakers and capital equipment providers serving AI infrastructure demands significantly outperform software companies, which face slower enterprise IT budgets, elongated sales cycles, and cautious spending by smaller businesses. Software has…

    Source

  2. Brian Albrecht

    Two workloads cannot use the same GPU-hour or megawatt, so as intelligence gets copied users bid harder for compute and electricity; the Ricardian rent lands on the scarce complement rather than on the model.

    Source

  3. Kris

    Bottleneck rent transfer from AI buyers to chipmakers

    Source

  4. Artisan Partners

    Expanding AI capabilities sent software shares tumbling as investors reassessed business models, competitive positioning and long-term monetization potential. At the same time, leadership within AI shifted toward infrastructure-oriented segments…

    Source

  5. Michael Spencer

    Because each inference by an AI model costs measurable compute resources, companies running these models become dependents on the infrastructure layer. Whether through GPU purchases from Nvidia or cloud services from AWS/GCP/Azure, the economics…

    Source

2 voices

Software margins hold or Nvidia's slips below 70%

  1. Michael Spencer

    As businesses spend more on AI tokens and evaluate suppliers on product execution and cost efficiency rather than raw model power, enterprises shift spending toward the provider with the best cost structure, product-market fit, and credibility.…

    Source

  2. Vltava Fund

    Following the historical pattern of railroads, electrification, and the internet, an initial infrastructure build-out phase precedes a later phase in which non-technology sectors leverage the new capability to reorganize their operations and…

    Source

What would settle it

The dated tests.

Each test names the public source that settles it, the rule and the day. The Call’s number, the readers’ median and the machines’ numbers stand beside it, as on the Docket.

  1. NVIDIA, gross margin, quarter ended October 25, 2026: whether it comes in at or above 70%.

    On the Docket Pendingth049-t01Pre-specified

    Question
    Did the gross profit of Nvidia for the quarter ended October 25, 2026 come to at or above 70.0% of its revenue?
    Source
    SEC EDGAR, XBRL company facts of Nvidia (Forms 10-Q and 10-K)
    Rule
    Divide the gross profit by the revenue that Nvidia reports for the quarter ended October 25, 2026 in its 10-Q or 10-K filing on SEC EDGAR. The answer is yes if the ratio is at or above 70.0%; no if it is below 70.0%.
    If the source is late, revised or silent
    If Nvidia has not filed by December 11, 2026, or a filing restates a period the rule reads, the test is inconclusive, and the Result says what was read and what was missing.
    Base rate
    NVIDIA's gross margin was 75.0% for the quarter ended July 26, 2026, by its filing on SEC EDGAR.
    Outside view
    A year earlier, for the quarter ended July 27, 2025, the same line read 72.4%, so the rungs sit on the last print.
    What would change the number
    A change in product mix, a one-time charge, or a reclassified line would move the reading.

    The Call, before the dateExpects yes. Gives the yes answer 84%.

    84%

    0 · no100 · yes

    The machinesClaude 93% · DeepSeek 87%

    Claude: 93%DeepSeek: 87%
    The ladder 3 rungs on one reading, Nov 18, 2026: each asks whether it lands above its threshold, so the Call’s numbers down the rungs sketch where it expects the reading to land.

    1. Above 70%Call 84% · Claude 93% · DeepSeek 87%

      84%

    2. Above 73%Call 68% · Claude 80% · DeepSeek 68%

      68%

    3. Above 76%Call 30% · Claude 40% · DeepSeek 27%

      30%

    0 · no50100 · yes

    Your number

  2. NVIDIA, gross margin, quarter ended October 25, 2026: whether it comes in at or above 73%.

    On the Docket Pendingth049-t02Pre-specified

    Question
    Did the gross profit of Nvidia for the quarter ended October 25, 2026 come to at or above 73.0% of its revenue?
    Source
    SEC EDGAR, XBRL company facts of Nvidia (Forms 10-Q and 10-K)
    Rule
    Divide the gross profit by the revenue that Nvidia reports for the quarter ended October 25, 2026 in its 10-Q or 10-K filing on SEC EDGAR. The answer is yes if the ratio is at or above 73.0%; no if it is below 73.0%.
    If the source is late, revised or silent
    If Nvidia has not filed by December 11, 2026, or a filing restates a period the rule reads, the test is inconclusive, and the Result says what was read and what was missing.
    Base rate
    NVIDIA's gross margin was 75.0% for the quarter ended July 26, 2026, by its filing on SEC EDGAR.
    Outside view
    A year earlier, for the quarter ended July 27, 2025, the same line read 72.4%, so the rungs sit on the last print.
    What would change the number
    A change in product mix, a one-time charge, or a reclassified line would move the reading.

    The Call, before the dateExpects yes. Gives the yes answer 68%.

    68%

    0 · no100 · yes

    The machinesClaude 80% · DeepSeek 68%

    Claude: 80%DeepSeek: 68%

    Your number

  3. NVIDIA, gross margin, quarter ended October 25, 2026: whether it comes in at or above 76%.

    On the Docket Pendingth049-t03Pre-specified

    Question
    Did the gross profit of Nvidia for the quarter ended October 25, 2026 come to at or above 76.0% of its revenue?
    Source
    SEC EDGAR, XBRL company facts of Nvidia (Forms 10-Q and 10-K)
    Rule
    Divide the gross profit by the revenue that Nvidia reports for the quarter ended October 25, 2026 in its 10-Q or 10-K filing on SEC EDGAR. The answer is yes if the ratio is at or above 76.0%; no if it is below 76.0%.
    If the source is late, revised or silent
    If Nvidia has not filed by December 11, 2026, or a filing restates a period the rule reads, the test is inconclusive, and the Result says what was read and what was missing.
    Base rate
    NVIDIA's gross margin was 75.0% for the quarter ended July 26, 2026, by its filing on SEC EDGAR.
    Outside view
    A year earlier, for the quarter ended July 27, 2025, the same line read 72.4%, so the rungs sit on the last print.
    What would change the number
    A change in product mix, a one-time charge, or a reclassified line would move the reading.

    The Call, before the dateExpects no. Gives the yes answer 30%.

    30%

    0 · no100 · yes

    The machinesClaude 40% · DeepSeek 27%

    Claude: 40%DeepSeek: 27%

    Your number

  4. NVIDIA, revenue growth from a year earlier, quarter ended October 25, 2026: whether it comes in at or above 80%.

    On the Docket Pendingth049-t04Pre-specified

    Question
    Did the revenue of Nvidia for the quarter ended October 25, 2026 grow at or above 80.0% from the quarter ended October 26, 2025?
    Source
    SEC EDGAR, XBRL company facts of Nvidia (Forms 10-Q and 10-K)
    Rule
    Compare the revenue that Nvidia reports for the quarter ended October 25, 2026 with the quarter ended October 26, 2025, in its 10-Q or 10-K filing on SEC EDGAR. The answer is yes if growth is at or above 80.0%; no if it is below 80.0%.
    If the source is late, revised or silent
    If Nvidia has not filed by December 11, 2026, or a filing restates a period the rule reads, the test is inconclusive, and the Result says what was read and what was missing.
    Base rate
    NVIDIA's revenue growth from a year earlier was 105.9% for the quarter ended July 26, 2026, by its filing on SEC EDGAR.
    Outside view
    The year-earlier quarter is not on the same concept in the filings, so the rungs sit on the last print alone.
    What would change the number
    The results-calendar consensus for the quarter ended October 25, 2026 implies 90.9%, and the middle rung is centred there.

    The Call, before the dateExpects yes. Gives the yes answer 72%.

    72%

    0 · no100 · yes

    The machinesClaude 11% · DeepSeek 22%

    Claude: 11%DeepSeek: 22%
    The ladder 3 rungs on one reading, Nov 18, 2026: each asks whether it lands above its threshold, so the Call’s numbers down the rungs sketch where it expects the reading to land.

    1. Above 80%Call 72% · Claude 11% · DeepSeek 22%

      72%

    2. Above 90%Call 52% · Claude 8% · DeepSeek 10%

      52%

    3. Above 100%Call 28% · Claude 3% · DeepSeek 8%

      28%

    0 · no50100 · yes

    Your number

  5. NVIDIA, revenue growth from a year earlier, quarter ended October 25, 2026: whether it comes in at or above 90%.

    On the Docket Pendingth049-t05Pre-specified

    Question
    Did the revenue of Nvidia for the quarter ended October 25, 2026 grow at or above 90.0% from the quarter ended October 26, 2025?
    Source
    SEC EDGAR, XBRL company facts of Nvidia (Forms 10-Q and 10-K)
    Rule
    Compare the revenue that Nvidia reports for the quarter ended October 25, 2026 with the quarter ended October 26, 2025, in its 10-Q or 10-K filing on SEC EDGAR. The answer is yes if growth is at or above 90.0%; no if it is below 90.0%.
    If the source is late, revised or silent
    If Nvidia has not filed by December 11, 2026, or a filing restates a period the rule reads, the test is inconclusive, and the Result says what was read and what was missing.
    Base rate
    NVIDIA's revenue growth from a year earlier was 105.9% for the quarter ended July 26, 2026, by its filing on SEC EDGAR.
    Outside view
    The year-earlier quarter is not on the same concept in the filings, so the rungs sit on the last print alone.
    What would change the number
    The results-calendar consensus for the quarter ended October 25, 2026 implies 90.9%, and the middle rung is centred there.

    The Call, before the dateEither answer fits the Call. Gives the yes answer 52%.

    52%

    0 · no100 · yes

    The machinesClaude 8% · DeepSeek 10%

    Claude: 8%DeepSeek: 10%

    Your number

  6. NVIDIA, revenue growth from a year earlier, quarter ended October 25, 2026: whether it comes in at or above 100%.

    On the Docket Pendingth049-t06Pre-specified

    Question
    Did the revenue of Nvidia for the quarter ended October 25, 2026 grow at or above 100.0% from the quarter ended October 26, 2025?
    Source
    SEC EDGAR, XBRL company facts of Nvidia (Forms 10-Q and 10-K)
    Rule
    Compare the revenue that Nvidia reports for the quarter ended October 25, 2026 with the quarter ended October 26, 2025, in its 10-Q or 10-K filing on SEC EDGAR. The answer is yes if growth is at or above 100.0%; no if it is below 100.0%.
    If the source is late, revised or silent
    If Nvidia has not filed by December 11, 2026, or a filing restates a period the rule reads, the test is inconclusive, and the Result says what was read and what was missing.
    Base rate
    NVIDIA's revenue growth from a year earlier was 105.9% for the quarter ended July 26, 2026, by its filing on SEC EDGAR.
    Outside view
    The year-earlier quarter is not on the same concept in the filings, so the rungs sit on the last print alone.
    What would change the number
    The results-calendar consensus for the quarter ended October 25, 2026 implies 90.9%, and the middle rung is centred there.

    The Call, before the dateExpects no. Gives the yes answer 28%.

    28%

    0 · no100 · yes

    The machinesClaude 3% · DeepSeek 8%

    Claude: 3%DeepSeek: 8%

    Your number

In The Buildout

The stories that take up this thesis, with their own Calls and tests.

A thesis page states one question and both sides of it; DeepStack takes no side in words, and its view is the number it gives each test before the date. Analysis and opinion, not investment advice. Voices are paraphrased from public writing and attributed by name; DeepStack shows no score, ranking or accuracy for any person. Pre-specified means the words were approved on or before the test’s date. Specified after the date means they were written afterwards: such a test is counted and shown, and never rated. An open question has no words yet. The Call’s number is the chance, from 0 to 100, that the Call gives the yes answer to a test’s question, recorded before the test’s date; it is DeepStack’s own reading, not a market price and not advice. The readers’ mark on the same line is the readers’ median, the middle of the numbers signed-in readers gave the test, shown from 25 readers. The machines: Each model read this page and nothing else. The number that counts is the latest one each model gave before the test closed.