Seaport flags Nvidia's cloud contract accounting risk

Seaport Research highlights Nvidia's $26 billion in cloud compute service agreements, saying they sit in a "grey area of GAAP rules"

Analyst estimates these commitments could effectively act as customer discounts, impacting margins if recognized

"Put another way, if Nvidia had to recognize its $6 billion in compute agreements as part of COGS, it would reduce gross margin from an estimated 72% to 68%, cutting pro-forma EPS from $6.28 to $5.97," Seaport said

While small in the context of Nvidia's overall earnings, the analyst said the impact is "still meaningful for a company facing intense investor scrutiny on gross margins"

Analysts further stressed on growing competitive pressure, saying "remain negative on Nvidia as signs of competition increase"

Shares of chipmaker Nvidia NVDA.O closed 0.02% higher at $179.92