Nvidia shares plunged in early premarket trading in New York. The world's most valuable chip maker is being battered by a global selloff, rising recession fears, AI bubble unwind (mid-July report: "Did The AI Bubble Just Burst, And What Happens Next") , and reports of delays in its new AI chip production.
The Information reports that Nvidia has informed Microsoft and other cloud providers that its most advanced AI chip models in the Blackwell series (B200 AI chip) face three months of delays following the discovery of a design flaw "unusually late in the production process."
Google, Meta, and Microsoft are betting billions of dollars on Nvidia's new chips to maintain top leadership in the AI arms race. All three companies have ordered "tens of billions of dollars" of advanced AI chips that might not be produced until later this year and might not be ready for mass shipment until the first quarter of 2025.
Nvidia spokesperson John Rizzo told The Verge that production of the new chip could begin "ramping in the second half of this year," adding, "Beyond that, we don't comment on rumors."
For Nvidia, the new AI chips were supposed to lead to new yearly releases of advanced chips, with executives stating just months ago that "Blackwell-based products will be available from partners" starting in 2024.
Now, Nvidia must soon compete with other chip companies, such as AMD, in the AI race.
Nvidia's B200 chips will replace the popular H100 chips that unleashed huge sales and robust profits for Nvidia, catapulting shares to the stratosphere.
However, a production delay sparked turmoil in shares on Monday morning, down as much as 10% in premarket trading to the $96 handle. From the $140 peak in mid-June, shares have slid nearly 31%. Now, we must add that a global selloff is also underway this AM.
Meanwhile, UBS analyst Sunny Lin wrote in a note to clients Monday that Nvidia's manufacturing partner, Taiwan Semiconductor Manufacturing, might run into potential production issues:
"We believe Nvidia could be prioritizing CoWoS-L's tight capacity to B200, which has higher value for the GB200 superchip...this may enable Nvidia [to have] better flexibility and be less constrained by TSMC's CoWoS capacity."
None of this will help bulls argue against iconic fund Elliott Management's argument that Nvidia is in a "bubble", and the artificial intelligence technology driving the chipmaking giant’s share price is "overhyped with many applications not ready for prime time".
