Nvidia CEO Jensen Huang dismissed concerns about Oracle's thin profit margins on GPU cloud services during an interview at the CNBC Investing Club's Monthly Meeting on Tuesday. According to CNBC, Huang stated Oracle will be "wonderfully profitable" over time despite current margin pressure.

Oracle shares fell as much as 7.1% on Tuesday after The Information reported the company generated $900 million in sales from its Nvidia chip cloud business during the three months ending August, with gross margins of only 14%. The stock closed down 2.5% at $284.24 per share. Oracle's overall business typically maintains gross margins around 70%, creating concern among investors about the profitability of its AI infrastructure expansion.

Bloomberg reported the company managed approximately $125 million in gross profit on the $900 million in revenue. Internal documents showed Oracle was losing considerable amounts on smaller GPU rentals of both new and older graphics processing units.

Why Lower Margins Matter for Cloud Providers

The margin squeeze affects Oracle's financial outlook as its AI cloud business expands relative to traditional software operations. Huang acknowledged that new technology deployments often face initial profitability challenges. He explained that operating large-scale AI data centers requires extensive infrastructure including land, power, cooling systems, and complex operational management.

Guggenheim analyst John DiFucci wrote that Oracle's gross margin contribution from cloud computing deals is probably lower at the beginning before revenue starts to flow. Yahoo Finance reported DiFucci believes Oracle would be unlikely to accept arrangements with less than 25% gross margin over their lifetime. The analyst reiterated his buy rating, noting Oracle provides better performance at lower cost without sacrificing comfortable profits.

Oracle announced in September that its remaining performance obligations jumped 359% year over year in fiscal 2026 first quarter. The company projected $144 billion in cloud infrastructure revenue by 2030, up from just over $10 billion in 2025. These projections drove a 36% single-day stock surge in September before the recent margin concerns emerged.

Broader Impact on AI Infrastructure Competition

Cloud providers face similar profitability pressures as they compete for AI computing market share. Major hyperscalers including Amazon Web Services, Microsoft Azure, and Google Cloud are collectively investing around $240 billion annually in data centers, power infrastructure, and servers to meet AI demand. AWS saw its operating margin decline in the second quarter of 2025 due to substantial AI infrastructure spending.

TechCrunch reported that Meta plans to spend $600 billion on infrastructure through the end of 2028, with $30 billion spent in the first half of 2025 alone. The company recently signed a $10 billion cloud contract with Google Cloud. Oracle secured a $300 billion five-year computing deal with OpenAI, positioning itself as a leading AI infrastructure provider despite current margin concerns.

These investments reflect the capital-intensive nature of AI infrastructure buildout. Cloud providers must balance aggressive pricing to win contracts against the high costs of acquiring Nvidia GPUs and operating power-hungry data centers. The race favors companies with deep financial resources capable of sustaining lower margins during the market development phase.

Further Reading

For deeper insights into global adoption trends and regulatory frameworks shaping alternative financial and technology systems, our Alternative Financial Systems Index tracks adoption metrics and policy developments across 50 countries. The index provides data on how governments and enterprises are adapting to new infrastructure demands.