Nvidia’s B200 GPU costs approximately $6,400 to produce but sells for $30,000-$40,000 – an implied chip-level gross margin of roughly 82%. Yet this extraordinary margin obscures a more nuanced reality: Nvidia’s pricing power depends on supply chain constraints it does not control.
The counterintuitive finding: The actual GPU silicon – 208 billion transistors across two ~800mm squared dies fabricated on TSMC’s 4NP process – represents less than one-sixth of total production cost.
Where Value Really Concentrates
Nvidia’s chip design brilliance is real, but the bill of materials shows that memory and packaging dominate the economics. The silicon – Nvidia’s core intellectual property – accounts for just 14% of the total.
This inverts intuitive assumptions about semiconductor value. The chip itself isn’t the expensive part – the memory and the assembly are.
The Margin Architecture
If the B200 sells at $30,000-$40,000 with a $6,400 production cost, chip-level gross margins exceed 75-80%. But this excludes R&D amortization. Jensen Huang stated Nvidia’s Blackwell R&D budget totaled approximately $10 billion.
If Nvidia ships 2 million B200 units in 2025, R&D cost per unit is $5,000 – nearly doubling effective production cost.
Key Takeaway
As the AI Memory Chokepoint shows, Nvidia’s margins depend on memory pricing dynamics it doesn’t control. The headline margins obscure structural vulnerability.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
