Nvidia shares have experienced a significant tumble in early Monday trading, with the stock’s one-month decline reaching around 23%. This downward trend is part of a broader pullback in global tech stocks and is exacerbated by reports of a delay in the delivery of Nvidia’s highly anticipated AI chips, known as Blackwell.
Earlier this year, Nvidia unveiled the Blackwell line of processors, which are designed to perform AI tasks at more than twice the speed of the company’s current Hopper chips. These new chips also promise greater energy efficiency and bespoke flexibility, which positions them as a revolutionary upgrade in Nvidia’s product lineup. Nvidia planned to ramp up production of these processors in the second half of this year while continuing to sell its H100 “Hopper” series to major hyperscaler clients such as Microsoft, Meta Platforms, and Google parent Alphabet.
Hyperscalers, which manage vast data processing needs, are expected to invest approximately half a trillion dollars over the next two years in expanding their computing infrastructure. This massive investment is driven by the necessity to leverage large datasets to improve a variety of services, from drive-through dining efficiency to advanced pharmaceutical testing. Nvidia’s new Blackwell chips were anticipated to play a significant role in these expansions, offering the necessary computational power and efficiency.
Nvidia CEO Jensen Huang has described Blackwell as potentially the “most successful product” in the tech industry’s history, underscoring the high expectations for these chips. However, recent reports from tech news outlet The Information have thrown a wrench into Nvidia’s plans. According to these reports, Nvidia informed Microsoft and an unnamed cloud service provider of a design flaw in the Blackwell architecture. This flaw is expected to delay the production ramp and delivery dates by approximately three months.
The timing of this delay is crucial as analysts had projected that Blackwell would start generating significant revenue for Nvidia in the third quarter of this year, with the chips making their way into global data centers by the year’s end. AI demand and Nvidia’s strong market position were expected to drive the company’s data center revenues to as high as $150 billion next year, largely propelled by the introduction of Blackwell.
Benchmark analyst Cody Acree highlighted in a note following Nvidia’s second-quarter earnings that Blackwell was expected to be in full production by the second quarter, with enterprise system and cloud partners preparing for global availability later in the year. Despite the reported delay, demand for Nvidia’s H200 and Blackwell chips remains robust, with expectations that demand may exceed supply well into the next year.
Goldman Sachs analyst Toshiya Hari, who reiterated his ‘conviction buy’ rating and a $135 price target on Nvidia stock following the weekend report, expressed confidence that Blackwell revenues would remain a major component of Nvidia’s near-term growth. Hari noted that while the reported delay could introduce some short-term volatility in Nvidia’s fundamentals, it was unlikely to affect the company’s earnings for CY2025 or its long-term competitive standing. He emphasized that any short-term disruptions would be outweighed by the long-term potential and strategic importance of the Blackwell chips.
Nvidia is scheduled to report its third-quarter earnings later this month. In May, the company told investors that current-quarter revenues were expected to rise to around $28 billion, surpassing expectations and alleviating some investor concerns about the potential disruptions related to the Blackwell launch.
Despite this positive outlook, the reported delay has led to investor concerns that customers might cancel orders for the older H100 chips in anticipation of the new Blackwell processors. This concern has contributed to the stock’s decline, with Nvidia shares falling 9.5% in premarket trading, indicating an opening bell price of $97.08 each. If this decline persists through the trading session, it would drag Nvidia stock into bear market territory, which is typically defined by a 20% decline from a stock’s recent peak. Nvidia shares closed at an all-time high of $135.58 each on June 18.
This situation underscores the volatile nature of the tech industry, where high expectations and rapid advancements can lead to significant market fluctuations. Nvidia’s experience highlights the challenges faced by leading tech companies in balancing innovation, production timelines, and market expectations. The reported delay in Blackwell chip production presents a notable obstacle for Nvidia, but the company’s strong market position and ongoing demand for its products suggest that it is well-positioned to navigate these challenges in the long term.
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