Fed Raises Rates for First Time Since July 2023 as Inflation Outlook Warns Investors

Jensen Huang said Nvidia expects to sell twice as many chips over the coming year, a forecast that runs ahead of the company's own written guidance. Speaking to reporters at an artificial intelligence gathering convened by King Charles III in Scotland, Huang gave the unit figure, while Nvidia has guided to about 70% revenue growth for the fiscal year ending in January 2028, or roughly $673 billion. If units double while revenue grows 70%, average revenue per chip falls by roughly 15%. Nvidia reported second-quarter revenue of $96.2 billion, up 106% from a year earlier, with data center sales of $89.0 billion and a 75.0% gross margin, and guided third-quarter revenue to $108 billion, plus or minus 2%. The company has said gross margin will decline and bottom out in the fourth quarter of fiscal 2027 at 71% to 72%, partly because of memory prices, a trough that arrives before the unit doubling does. At the same event, King Charles III told executives from Nvidia, OpenAI, Google DeepMind, and Anthropic that the industry needs sufficient means of control before it is too late, and Huang argued that safety belongs to individual companies rather than a coordinated pause.

Citi expects shortages across the global memory semiconductor market to deepen through 2031, driven by rising demand for high-bandwidth memory, DRAM and NAND as artificial intelligence systems adopt continual learning. In a research note published Monday, the investment bank identified continual learning as a potential central theme in AI development over the next five years, an approach that updates AI models with new tasks while retaining prior knowledge and so drives demand for both memory and data storage. Citi forecasts HBM bit demand will increase 62% year over year to 75.2 billion gigabits in 2027, followed by a further 69% rise to 127.0 billion gigabits in 2028, and it expects demand for enterprise solid-state drives to expand as AI systems require additional storage capacity. For DRAM, Citi projects global demand growth of 30% in 2027 and 35% in 2028, against supply growth of 19% and 22%, producing supply-demand ratios of -8.7% and -9.7% for the respective years. The bank anticipates a similar imbalance in NAND memory, forecasting demand growth of 29% in 2027 and 33% in 2028 versus supply increases of 21% and 25%, with NAND supply-demand ratios of -6.1% in 2027 and -5.5% in 2028 compared with an estimated -0.8% in 2026. In its equity research, Citi named Samsung Electronics, SK Hynix, Micron, Sandisk and Kioxia as its preferred memory semiconductor stocks, and highlighted Montage, Applied Materials, Lam Research, TES, Eugene Tech and TechWing within semiconductor equipment and materials.

UBS now expects artificial intelligence capital expenditure to reach nearly $1 trillion in 2026 before climbing to around $1.4 trillion in 2027, with surging memory costs accounting for most of the increase. The bank's updated estimates put total AI capex at $998 billion this year, almost double the $506 billion recorded in 2025, and forecast spending of $1.447 trillion next year. Memory is emerging as the main source of that growth, with UBS estimating memory spending will climb from $71 billion in 2025 to $367 billion this year and $923 billion in 2027, while other AI-related costs are estimated at $631 billion in 2026 before declining to $525 billion next year. That means higher memory costs will account for about 60% of the increase in AI capex this year and more than the entire net increase in 2027, and across the two years UBS calculates that roughly 90% of the nearly $1 trillion increase in AI capital expenditure between 2025 and 2027 will come from higher memory spending. Memory represented about 14% of total AI capex in 2025, a share the bank estimates will rise to 37% this year and reach 64% in 2027, and UBS said price-driven increases would add relatively little to real U.S. gross domestic product, instead representing a transfer of income and profits toward memory producers in Asia.