The half day of reckoning is here
Wall Street is quiet today. Trading is thin on this post Thanksgiving Friday. But beneath the surface, the technicals for Nvidia (NVDA) are screaming a warning that most retail investors are ignoring. On Wednesday, November 26, the stock closed at $214.12. This marks a staggering climb, yet the cracks in the foundation are no longer invisible. The narrative has shifted from infinite demand to supply chain fragility and margin erosion. We have seen this movie before. In March 2000, Cisco Systems was the indispensable backbone of the internet. Today, Nvidia is the indispensable backbone of artificial intelligence. The parallels are not just historical rhymes; they are mathematical warnings.
The gross margin compression trap
Nvidia is losing its pricing power. While the top-line revenue numbers in the per the November earnings report looked robust, the underlying health of the margins is decaying. For the last two years, Nvidia enjoyed gross margins north of 75 percent. However, the transition to the Blackwell architecture has introduced a level of manufacturing complexity that is eating into profits. According to the third quarter 10-Q, gross margins have slipped toward 71 percent as the costs of TSMC’s CoWoS-L packaging and high-bandwidth memory (HBM3e) skyrocket. When the leader of a sector sees its margins peak and then roll over, the stock price almost always follows. Cisco experienced the exact same phenomenon in early 2000 when the cost of scaling its high-end routers began to outpace the efficiency gains of its supply chain.
A side by side look at market mania
The following table compares the peak of the dot-com era’s darling with Nvidia’s current standing as of November 28, 2025. The similarities in market concentration are unsettling.
| Metric | Cisco (March 2000) | Nvidia (November 2025) | |||
|---|---|---|---|---|---|
| Price-to-Earnings (Forward) | 110x | 58x | |||
| Market Cap Concentration | 4.1% of S&P 500 | 7.2% of S&P 500 | Market Cap | $555 Billion | $5.2 Trillion |
| Primary Driver | Internet Infrastructure | Generative AI Compute |
The mechanism of ghost demand
Why do these bubbles burst? It is usually a result of double ordering. In the late nineties, telecommunications companies ordered twice as many routers as they needed to ensure they could get at least half. We are seeing the same behavior today with hyperscalers like Microsoft, Meta, and Alphabet. These companies are terrified of being left behind in the AI arms race. They are over-provisioning H200 and Blackwell chips today, which creates a vacuum of demand for tomorrow. Following the latest tightening of export controls, the pool of buyers for this excess inventory has shrunk significantly. If the large cloud providers decide to pause their capital expenditure (CAPEX) for even one quarter, Nvidia’s revenue could drop by 30 percent overnight. This is the exact technical mechanism that crushed Cisco. Once the backlog was cleared, there were no new buyers at the same scale.
Visualizing the concentration risk
The chart above illustrates the revenue concentration for Nvidia as of late 2025. When nearly half of your revenue comes from four companies, you are not a diversified semiconductor giant. You are a high-beta play on the CAPEX budgets of four CEOs. If the ROI on AI software does not materialize by mid-2026, those budgets will be the first thing to be slashed.
The power grid bottleneck
There is a physical limit to Nvidia’s growth that analysts are ignoring. It is not about chip design; it is about the electrical grid. A single Blackwell rack consumes up to 120 kilowatts of power. Data center operators are reporting lead times of three to five years for new high-voltage transformers. You can buy all the chips you want, but if you cannot plug them in, they are expensive paperweights. This physical constraint will force a deceleration in ship-to-grid conversions. The market expects a linear growth curve, but the reality is a hard ceiling imposed by 1970s era utility infrastructure. This bottleneck is the specific catalyst that could turn a slow correction into a sharp pivot as companies realize their purchased hardware cannot be deployed at the speed they promised shareholders.
Watching the February milestone
The next critical data point is the February 18, 2026, earnings call. This will be the first time the market sees a full quarter of Blackwell shipments reflected in the audited financials. If the gross margins drop below 70 percent on that date, the Cisco comparison will move from a skeptical theory to a market reality. Watch the inventory levels on the balance sheet. A sudden spike in finished goods inventory will be the final signal that the AI supercycle has hit its peak. The era of easy gains is over; the era of technical scrutiny has begun.
