Nvidia expects its semiconductor testing capacity to double between 2026 and 2027. That is a big claim about a part of the chip business most people never think about.
Why testing became the bottleneck
Semiconductor testing is the stage after a chip is fabricated and packaged, where specialized equipment runs it through checks to confirm it performs as designed. This back-end stage, along with advanced packaging, has become a choke point as demand for AI hardware surges.
Nvidia’s response has been to pay for capacity before it exists. On October 13, 2026, the company signed a prepayment agreement with King Yuan Electronics (KYEC) to reserve future testing capacity.
The deal ties into a KYEC investment plan that could reach up to $1.4 billion. In plain terms, Nvidia is handing over money now so that a supplier’s new testing lines are spoken for when they come online.
KYEC has been expanding hard to meet AI demand. The company lifted its 2024 capital expenditure to a record $1.45 billion, up from a prior estimate of $1.14 billion.
A pattern, not a one-off
In July 2026, the company struck a separate $1.5 billion prepayment deal with Amkor Technology to secure advanced packaging and testing facilities.
The equipment makers are scaling up too. Advantest plans to raise production of system-on-chip testers to 5,000 a year by March 2027. That compares with 3,000 in mid-2025.
The broader trend extends beyond Nvidia. Leading tech companies have been prepaying for capacity to get ahead of supply constraints that are expected to persist into 2027 and 2028.
The growth math behind the spending
The company has set a goal of doubling its chip shipments in 2027.
Nvidia is also projecting 70% revenue growth for fiscal 2028. It is making that forecast while acknowledging supply-chain limits on memory and testing processes.
What this means
For investors, the KYEC and Amkor deals are a financial signal that Nvidia sees sustained demand for its AI hardware into 2027.
The supplier side benefits as well. KYEC, Amkor, and Advantest are all expanding on the back of AI demand, and prepayments reduce the risk of building capacity that sits idle.
Prepayments shift some exposure onto Nvidia if demand cools before the new capacity comes online. And Nvidia’s own forecasts note that memory supply and testing remain limiting factors, meaning the 70% fiscal 2028 growth projection depends on the supply chain delivering on schedule.
What to watch next: whether KYEC’s investment reaches the full $1.4 billion envisioned, whether Advantest hits its 5,000-tester target by March 2027, and whether Nvidia signs more prepayment deals of this kind.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.