King Slide’s 87% Gross Margin Tops Nvidia’s. What Makes Its Server Rails So Hard to Replace?

Hello everyone,

Nvidia shares surged 8.7% in U.S. trading on Thursday, marking their biggest one-day gain in nearly a year and four months.

The reason was the company’s earnings call the previous day, when it projected revenue growth of 70% for fiscal 2028, which ends in late January 2028.

1. That is far above analysts’ average forecast of 45%.

1. It effectively means AI demand will continue accelerating in 2027, with growth outpacing 2026—more optimistic than most had expected.

Jensen Huang（黃仁勳） added an explanation for why Nvidia is forecasting 70% growth.

That is simply the level the supply chain can currently support. “But our demand is far, far higher than that.”

Nvidia’s CFO said the demand figures provided by customers point to “a doubling” of demand.

That brings us to an obvious question for readers in Taiwan, home to much of Nvidia’s supply chain: Who are the “culprits” constraining Nvidia and limiting its growth next year to 70%?

Morgan Stanley wrote in a client note yesterday that, because Nvidia has already lowered its HBM requirements, the main remaining supply-chain bottlenecks should be TSMC’s 3nm capacity and ABF substrates (T-glass fiberglass cloth)—two familiar suspects.

The good news is that this would make it even easier for TSMC to justify raising prices next year. Morgan Stanley estimates an increase of 5% to 10%.

Back to this issue of the newsletter.

Remember TSMC’s second-quarter earnings call in July? Micron had just reported earnings ahead of the call, and soaring memory prices had pushed its gross margin to an astronomical 86%.

When TSMC Chairman and CEO C.C. Wei（魏哲家） was asked about it, he expressed envy at the memory industry’s extraordinarily high margins. “86%!? We’re already very happy with our [record-breaking] 68% this quarter.”

At the time, Micron was criticized by many in the industry for earning “windfall profits” that were driving up smartphone and laptop prices.

Then King Slide Works（川湖科技）, a major server rail supplier, reported an even higher gross margin in its second-quarter earnings call: 87.4%, possibly setting a new record for Taiwan’s manufacturing sector.

As its stock price surged in response, founder Tsung-chi Lin’s（林聰吉） family unexpectedly climbed to the top of Forbes’ real-time ranking of Taiwan’s richest people, with a net worth exceeding US$20.7 billion, surpassing technology billionaires including Jason Chang（張虔生） and Pierre Chen（陳泰銘）.

But another topic from Nvidia’s latest earnings call was the company’s unusual forecast that its gross margin will continue declining over the next two quarters, falling to between 71% and 72%.

Why is King Slide so profitable? Will major customers simply stand by while a Taiwanese supplier earns higher margins than they do?

Read on in this issue.