Nvidia Sets Aside $1.1 Billion to Secure New Testing Capacity and Expand Supplier Capabilities

Key Facts

Nvidia announced agreements with suppliers on October 21 to expand production capacity in substrates, advanced packaging, semiconductor testing and optical engines. Chief Executive Jensen Huang said, "Demand is exceptional, and production capacity is the constraint." In its largest financial commitment, the company will make a $1.1 billion prepayment to KYEC to reserve capacity, supporting the construction of new testing facilities and equipment in the United States. KYEC is targeting the start of mass production in April 2027. The agreements come as expansion plans move toward production stages beginning in 2027, while major increases in substrates and packaging extend into 2028. Nvidia is thus tying its advance funding to easing bottlenecks that reach beyond chip manufacturing.

In substrates, Nvidia said agreements with IBIDEN, Samsung Electro-Mechanics and Unimicron will increase total capacity 2.5 times over the next three years. IBIDEN’s expansion at its Ono plant in Japan aims to triple current capacity, with production increases set to begin in the first quarter of 2028. Unimicron’s KF substrate expansion in Taiwan is expected to start adding capacity in the second quarter of 2027 and reach full capacity by mid-2028. These dates show that the announced overall increase will be achieved in stages, not all at once. Nvidia and Amkor also aim to increase interposer chip capacity in South Korea by more than 300% by the end of 2028.

In testing, Nvidia expects total capacity to double between calendar 2026 and 2027, supported by expansions in the United States, Taiwan and Singapore. KYEC’s U.S. prepayment targets mass production in April 2027, while expanded testing operations in Singapore are expected to begin mass production in February of the same year. These plans distribute the expansion across multiple sites and put the start of additional supply in 2027. The company aims to increase testing-stage capacity alongside plans to expand substrates and packaging. Some substrate targets, however, fall further out, extending into 2028.

For optical components, Nvidia and SPIL plan to expand capacity for optical engines in Taiwan used in co-packaged optics by 15 times by mid-2027, with a further doubling targeted by the end of 2028. This adds another component to the agreements, alongside substrates, packaging and testing. Meanwhile, Nvidia’s supply and capacity obligations rose to $279 billion as of July 26, 2026, from $119 billion in the previous quarter, according to its quarterly filing. The figure reflects the expansion of supply and capacity commitments alongside the announcement of supplier expansions. In results for the May-to-July 2026 period, the company posted net income of $59.69 billion, compared with $26.42 billion in the same period a year earlier.

Nvidia’s revenue rose to $96.22 billion in the May-to-July period, more than doubling year over year and exceeding the average analyst estimate of $92.27 billion. The company forecast revenue of about $108 billion for the August-to-October 2026 period, compared with analysts’ estimate of $104.86 billion. Chief Financial Officer Colette Kress said customer forecasts pointed to revenue growth closer to double in the fiscal year ending in January 2028, if supply constraints had not limited chip production. On the earnings call, Huang said the supply chain was covering 70% of demand, adding, "Our demand is much higher than that." After the call, shares rose 4.1% in after-hours trading, after ending the regular session down 1.6%.

The expansion timelines show that some of the new capacity is aimed at 2027, while increases in substrate, optics and interposer capabilities continue through 2028. Expanded testing capacity in Singapore is expected to begin mass production in February 2027, and the U.S. KYEC site is targeting April of the same year. Unimicron’s capacity additions are then set to begin in the second quarter of 2027, while further expansion at IBIDEN’s Ono plant is expected to start in the first quarter of 2028. Nvidia shares closed at $210.96 on October 23, after closing at $212.21 the previous day. The company has set a timeline running from near-term testing expansions to larger capacity targets in 2028.