The Numbers Don't Lie! Which Companies Are Vulnerable in the AI Supply Chain?
2026 is a U.S. midterm election year. Midterm elections often bring significant market volatility and pressure. We selected 28 companies across four major categories: AI chips/manufacturing, cloud companies, other AI software, and AI infrastructure. We ranked these companies based on their gross profit margins, net profit margins, and debt levels to identify the weak points in the AI supply chain.
Some interesting takeaways:
1. Software vs. Hardware: $NVIDIA(NVDA)$
2. Despite high growth rates and gross margins over 60% for database software companies like $MongoDB (MDB.US)$ and $Snowflake (SNOW.US)$ , both still have negative profit margins, indicating cost pressures.
3. AI infrastructure companies generally have low profit margins. For example, server assembler $Super Micro Computer (SMCI.US)$ has a net profit margin of only 3.4%; packaging and testing companies $ASE Technology (ASX.US)$ and $Amkor Technology (AMKR.US)$ have net profit margins below 10% and gross margins below 20%.
4. Connectivity chip companies show better profit margins, such as $Astera Labs (ALAB.US)$ and $Credo Technology (CRDO.US)$ .
5. Neocloud companies $CoreWeave (CRWV.US)$ and $NEBIUS (NBIS.US)$ have high gross margins but negative net profits.
(Note: Due to significant non-recurring items, adjusted net profit margins were used for Oracle, Intel, and Marvell. Data for other companies were obtained from the online information, using unadjusted net margin figures.)
From a debt ratio perspective:
1. $Oracle (ORCL.US)$ , Coreweave, $Vertiv Holdings (VRT.US)$ , Applovin, and Snowflake have relatively high debt ratios, though for different reasons. For instance, Software companies like Applovin and Snowflake don't have much CapEx; their spending is more on OpEx (operating expenses), mainly for technological innovation, platform expansion, software development, and maintenance. Their debt levels reflect a preference for rapid expansion over profitability.
2. Connectivity chip companies like Astera Labs and Credo Technology have very low debt.
3. $Intel (INTC.US)$ , despite past spending sprees, doesn't have an exceptionally high debt ratio, as its self-generating cash flow reduces dependence on external financing.
Overall, some sectors' businesses aren't particularly sexy. Despite relatively high growth rates, high debt ratios and thin profit margins make them vulnerable to profitability and debt pressures if they face a slowdown in growth rate.
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