Nvidia faces downward pressure on its gross margin for fiscal year 2026, mainly due to a $4.5 billion expense related to excess inventory and purchase commitments for its H20 products.

This significant financial adjustment is expected to pose a notable challenge to the company's short-term profitability. The substantial expenditure reflects potential risks in supply chain management, especially in a market environment where demand for AI chips is increasingly volatile. Nvidia needs to balance capacity planning with market demand to avoid ongoing financial impacts from similar inventory write-downs.