Shares of market bellwether Nvidia (NVDA) are down 28.6% from all-time highs, valuing the chip designer at a market cap of $2.47 trillion. The semiconductor giant has been feeling the heat in recent trading sessions as investors worry about the possibility of a recession in the U.S., interest rate hikes in Japan, and geopolitical tensions.
In addition to macroeconomic factors, weekend reports indicated that Nvidia's next-generation artificial intelligence (AI) chips will be delayed by three months, and mass shipments will begin in early 2025. The delay has been attributed to a design flaw in its next-gen chips uncovered late in the production process. Earlier this year, Nvidia unveiled its Blackwell (B200) line of chips, which performs AI tasks at twice the speed while using less energy.
Despite the sharp pullback off its highs, Nvidia stock has more than doubled investor returns in 2024, up 108% on the year so far.
Blackwell Chips Are Key for Nvidia
While Nvidia stated it will ramp up production of Blackwell chips in the second half of the year, it will continue to sell its H100 chip series to hyperscaler clients, which include tech giants such as Microsoft (MSFT), Alphabet (GOOGL) (GOOG), and Meta Platforms (META).
According to investment bank Barclays, hyperscalers might spend close to $500 billion in the next two years to expand their computing infrastructure and gain a lead in the AI race. In fact, Nvidia would have been betting on strong demand for its Blackwell chips to drive sales in fiscal Q3 of 2025 (ending in October). Analysts forecast Nvidia’s enviable market share and the launch of these next-gen AI chips to drive its data center sales to $150 billion in fiscal 2026.
Despite the unexpected delay in its chip launch, Goldman Sachs (GS) analyst Toshiya Hari reiterated a “conviction buy” rating on Nvidia, with a target price of $135. He expects Blackwell’s sales to account for a sizeable portion of the company’s growth story.
The analyst explained that the delay could result in near-term volatility, as Nvidia may experience muted growth in the last two quarters of fiscal 2025. However, higher sales in fiscal 2026 would offset this, allowing the semiconductor leader to maintain its competitive moat.
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