Nvidia (NVDA) shares traded about 2% higher on Wednesday, near $220, after the company used its GTC Berlin event on October 21 to put cash behind its supply chain. Nvidia is giving King Yuan Electronics (2449.TW), known as KYEC, a $1.1 billion capacity reservation advance to build new U.S. chip-testing facilities, with high-volume production targeted for April 2027.
KYEC was one of six supplier plans in the same release. “Capacity is the constraint,” CEO Jensen Huang said in it.
The $1.1 Billion Is the Small Number
- Substrate deals with IBIDEN (4062.T), Samsung Electro-Mechanics (009150.KS) and Unimicron (3037.TW) target 2.5 times today’s capacity over three years (IBIDEN gets a “multibillion-dollar” advance, amount undisclosed).
- Amkor Technology (AMKR) plans to grow advanced packaging capacity by more than 300% by the end of 2028 (measured in interposer wafer capacity in South Korea).
- Amkor also signed a new $1.3 billion agreement, taking its Nvidia deals to $3 billion.
- Nvidia expects its total testing capacity to double from calendar 2026 to 2027.
The bigger figure sits in Nvidia’s Q2 fiscal 2027 10-Q. Supply and capacity commitments jumped to $279 billion as of July 26, from $119 billion a quarter earlier, primarily for memory and manufacturing facilities. The KYEC advance is about 0.4% of that.
What Wednesday’s deals show is where the money is going: the slow steps between a finished chip design and a shipped system. That stretch has already slipped once this year, when Nvidia’s Kyber rack design was reportedly pushed from 2027 to 2028 over a circuit-board manufacturing problem.
Does Nvidia’s Demand Cover the Bet?
The filing schedules $87 billion of those commitments for fiscal 2028 and $88 billion for fiscal 2029. The Street expects revenue of $692 billion in fiscal 2028, up 68% from the $412 billion expected this year, and $903 billion in fiscal 2029.
On those estimates, the commitments equal about 13% of fiscal 2028 revenue and 10% of fiscal 2029. Those ratios show the scale, but revenue forecasts and last quarter’s 75% gross margin don’t establish that future supplier payments are covered.
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The KYEC advance is about 5% of that one quarter, so it’s easily funded. The heavier load is the $92 billion scheduled for the rest of fiscal 2027, against about $234 billion of revenue the Street expects over those two quarters.
Cash is the tighter test. Free cash flow fell to $21.40 billion in the July quarter from $48.59 billion three months earlier, the same quarter the commitments more than doubled. Nvidia tied the drop to working capital and cash taxes, and days sales outstanding rose to 60 from 45 on extended payment terms for some large customers.
Where the Bet Could Go Wrong
Inventory already grew faster than sales last year. It more than doubled to $21.40 billion at the end of fiscal 2026 from $10.08 billion, while revenue rose about 65% to $216 billion.
The 10-Q says some agreements can be cancelled or rescheduled before firm orders, sometimes at extra cost. It also warns that Nvidia may not be able to reduce them if demand differs from its plans.
That risk has a recent price tag. When U.S. export rules hit its H20 chip, Nvidia took a $4.5 billion charge in the April 2025 quarter for excess inventory and purchase obligations.
The Nvidia Number to Check on November 18
Nvidia’s Q3 fiscal 2027 report, expected November 18, will carry the first commitments figure since the $279 billion. The company has guided revenue to $108 billion, plus or minus 2%.
Another rise in commitments alongside an earnings beat would show Nvidia continuing to invest ahead of expected demand. If inventory also outgrows revenue, investors would need to distinguish preparation for new product launches from weaker-than-expected demand.
Until then, the suppliers hold the most direct upside. Amkor now has $3 billion of Nvidia agreements, and Nvidia’s CFO commentary says the rise to $279 billion was primarily related to memory procurement, without naming suppliers.
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