Nvidia’s stock and the shares of its hardware partners experienced significant declines on Monday following reports of a delay in the company’s next-generation AI processor, the Blackwell B200. This development intensified the ongoing stock market correction.
Nvidia informed major clients, including Microsoft and other leading cloud service providers, that the Blackwell B200 AI chips will be delayed due to a late-stage design flaw discovered during production. This setback is expected to push back the product’s release by at least three months.
Bernstein analyst Stacy Rasgon commented on the news, acknowledging the potential impact on market sentiment surrounding AI but maintained a cautious optimism. “While potential delays are never great, we aren’t panicking just yet,” Rasgon noted. He reiterated his outperform rating on Nvidia stock with a target price of 130, emphasizing Nvidia’s current competitive advantage.
Market Reaction
The announcement led to a sharp decline in Nvidia’s stock, which dropped 6.4% to close at 100.45. Taiwan Semiconductor Manufacturing Company (TSMC), responsible for producing Nvidia’s chips, saw its shares fall 1.3% to 147.95. Other data-center hardware vendors also felt the impact: Super Micro Computer’s stock fell 2.5% to 608.83, while Dell Technologies dropped 4% to 98.18. In contrast, Nvidia rival Advanced Micro Devices (AMD) gained 1.8%, closing at 134.82.
Analyst Perspectives
Raymond James analyst Srini Pajjuri maintained a strong buy rating on Nvidia and an outperform rating on AMD, suggesting that the delay should have limited impact on Nvidia’s near-term estimates. Pajjuri speculated that customers might temporarily switch to Nvidia’s current-generation Hopper AI chips.
Loop Capital analyst Ananda Baruah echoed this sentiment, predicting a relatively minimal overall impact from the delay. Baruah pointed out that shipments of Blackwell series chips were expected to be limited in 2024, with volume shipments now moving from the July to the October quarter.
Strong Demand for AI Chips
Despite the delay, demand for AI processors remains robust. Hyperscale cloud-computing service providers continue to drive strong demand for Nvidia’s AI processors. If the delay in Blackwell shipments persists, customers are likely to use Hopper chips to meet their immediate needs.
Nvidia’s position in the AI market has grown substantially, driven by the increasing adoption of AI technologies across various sectors. The Blackwell B200 chips, designed to provide significant improvements in AI processing capabilities, were highly anticipated by industry leaders such as Microsoft, Google, and Meta. These tech giants had placed substantial orders for the new processors to support their next-generation AI applications and data centers.
Background and Broader Implications
The discovered design flaw was identified by engineers at TSMC during the final stages of production. This flaw has led to decreased production yields, prompting the delay. This delay represents the second major challenge for Nvidia in recent weeks, following an antitrust investigation by the Department of Justice over alleged anti-competitive practices.
Nvidia’s recent performance had seen its stock value soar to new heights, largely due to booming demand for its AI semiconductors. However, this delay, coupled with regulatory scrutiny, has introduced new uncertainties for the company’s immediate future.
Nvidia is scheduled to announce its second-quarter earnings results later this month, where further details on the impact of the delay and the company’s outlook are expected.
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