Nvidia (NVDA) stocks and shares of data center hardware suppliers fell Monday amid reports of a delay for Nvidia’s next-generation AI processor. A deeper correction in the stock market exacerbated the declines.

↑
X

PLAY NOW
Nasdaq corrects after market beats expectations; CBOE, Ferrari, MercadoLibre in focus

Nvidia said Microsoft (MSFT) and another major cloud customer that its Blackwell B200 AI chips will be delayed due to a design flaw discovered late in the manufacturing process, The Information reported Friday night. The issue could delay the product launch by at least three months.

“Amid the recent turnaround in sentiment around AI, this latest news is unlikely to improve matters,” Bernstein analyst Stacy Rasgon said in a client note Monday. “But while potential slowdowns are never great, we’re not panicking just yet.”

He added: “Nvidia’s competitive position is so strong right now that we don’t expect a three-month delay to lead to any significant shifts in market share.”

Rasgon reiterated his outperform rating on Nvidia shares with a price target of 130.

Nvidia shares fall

On the stock exchange today, Nvidia shares fell 6.4% to close at 100.45.

Meanwhile, US stocks rose from Taiwanese semiconductor production (TSM), which makes Nvidia’s chips, fell 1.3% to close at 147.95.

Specialist in data centers Supermicrocomputer (SMCI) saw its shares fall 2.5% to 608.83. Industry peer Dell Technologies (DELL) saw its shares fall 4% to 98.18.

Meanwhile, Nvidia is a competitor Advanced micro devices (AMD) rose 1.8% to close at 134.82.

AMD could see some benefit from this

Raymond James analyst Srini Pajjuri maintained his strong buy rating on Nvidia shares and his outperform rating on AMD.

“A few months of delay should have limited impact on Nvidia’s near-term estimates,” Pajjuri said in a customer note. In the meantime, customers could switch plans to use Nvidia’s current-generation Hopper AI chips, he said.

“At the same time, we think it’s reasonable to expect AMD to get some benefit from it or at least increase customer interest,” Pajjuri said.

Loop Capital analyst Ananda Baruah expects the overall impact of any Nvidia chip delays to be “relatively minimal.”

He reiterated his buy rating on Nvidia shares with a price target of 175.

Demand for AI chips remains strong

Shipments of Blackwell’s series chips would be limited in calendar year 2024 anyway, Baruah said. A quarter pushback would shift volume shipments of Blackwell chips from the July quarter to Nvidia’s quarter ending in October, he said.

Bernstein’s Rasgon says demand for AI processors from hyperscale cloud-computing service providers remains strong. And if there’s a delay in Blackwell deliveries, those customers could use Hopper chips to fill the gap, he said.

Nvidia shares are on the IBD Leaderboard and Tech Leaders lists.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

YOU MAY ALSO LIKE:

Is Apple Stock a Buy or Sell Now That Warren Buffett Is Cutting His Stake?

AMD benefits from Intel’s problems

Monolithic force called ‘shining beacon of light’ amid gloomy chip earnings season

Stocks to Buy and Watch: Top IPOs, Big and Small Caps, Growth Stocks

View stocks on the leaders list that are close to a buy point