"NVIDIA Blackwell Rack Defect Causes Order Delays"...Layered Adversities Including Chip Export Controls

HSBC Lowers Nvidia Target Price
Amid Concerns Over Blackwell Chip Defects
and Impact of U.S. Export Controls

Artificial intelligence (AI) leader Nvidia is facing growing concerns over profitability slowdown due to technical defects and the impact of U.S. semiconductor export controls.

On the 13th (local time) in the U.S. New York stock market, Nvidia's stock closed at $133.23, down 1.97% from the previous trading day. During the session, it fell sharply by as much as 4%. Nvidia's stock has dropped about 13% since hitting an all-time intraday high on the 7th.

The factors driving the stock decline on this day are multifaceted.

IT specialized media reported that orders for Nvidia's latest AI chip, Blackwell, are being delayed due to rack defects. According to the report, the first shipment of racks equipped with Blackwell chips experienced overheating and issues with the chip-to-chip connection method. As a result, major customers, including big tech companies Microsoft (MS), Amazon Web Services, Google, and Meta Platforms, canceled some orders for the Rackwell GB200 racks.

Racks used in data centers are systems that consolidate hardware capable of processing large amounts of computation in parallel, playing an essential role in executing AI model training and inference.

Major customers of Nvidia, a large-scale cloud service provider, reportedly ordered over $10 billion worth of Blackwell racks per company. However, due to the Blackwell rack defects, some customers are either waiting to purchase subsequent versions of the racks or planning to buy Nvidia's previous generation AI chips.

MS, a partner of ChatGPT developer OpenAI, planned to install more than 50,000 GB200 racks equipped with Blackwell chips in Phoenix, Arizona. However, as deliveries were delayed, OpenAI, an investor in MS, requested MS to provide Nvidia's previous generation Hopper chips.

Attention is focused on how these delays in the latest AI rack orders will affect Nvidia's Q4 revenue for last year, which is scheduled to be announced in February. However, CEO Jensen Huang emphasized in November last year that the company would exceed previous targets by billions of dollars in Q4 revenue due to Blackwell chips.

Moreover, on the same day, the Joe Biden administration announced new export controls that allow the sale of semiconductors necessary for AI development to allies such as South Korea without restrictions, while setting import limits on AI semiconductors for countries that are neither allies nor countries of concern. This has increased concerns about profitability impacts for Nvidia. Nvidia has opposed the government measures. However, there are also expectations that these export controls may be eased under the second term of the Donald Trump administration, which begins on the 20th.

Meanwhile, Frank Lee, an analyst at UK-based HSBC, lowered Nvidia's target price from $200 to $185 per share on the same day. Although this still implies a 39% upside from the current stock price, it attracted attention as an opinion supporting the view that Nvidia will not show as steep growth as before.

However, Bank of America (BoA) stated in an investor memo on the same day that despite difficulties such as export restrictions on AI technology, Nvidia is showing results in robotics, autonomous vehicles, AI-based PCs, and workstations, maintaining a buy rating on Nvidia stock.

This content was produced with the assistance of AI translation services.