Given the quantum of fund inflows into AI-related investment themes, Wall Street appears laser-focused on NVIDIA's Blackwell production ramp-up as a guarantor of sorts for the secular AI tailwind. Today, Morgan Stanley has penned yet another note on NVIDIA's latest GPU architecture, this time choosing to divulge some additional information regarding what exactly caused a production bottleneck over the summer.
As we've noted in previous posts, NVIDIA had confirmed the rumors of a minor Blackwell design flaw during its recent earnings call, but assured investors that the resulting low-yields issue was rectified by implementing a few minor changes to the photomask - a specific template that is used to create bespoke patterns on semiconductor wafers.
NVIDIA $NVDA Blackwell ramp appears "quite strong" and issues with initial Blackwell silicon are "totally behind us", says Morgan Stanley, reiterating at 'Overweight' with a $150 price-target:
"In the shorter term, the Blackwell ramp appears to be quite strong, with no major…
— Stock Talk (@stocktalkweekly) October 10, 2024
Now, Morgan Stanley is out with its own take on the Blackwell production hiccup, noting that the low-yields issue was only discovered in the post-packaging stage. The ensuing scrapping of the subpar units resulted in a loss of "CoWoS and HBM3e," which were already in short supply and only aggravated NVIDIA's supply problems.
Morgan Stanley goes on to note:
"But those issues are behind the company and there is high conviction in prior guidance that they will have several billion in Blackwell revenue in the January quarter."
Elsewhere, Morgan Stanley has reiterated that it now sees a "quite strong" Blackwell production ramp-up, "with no major changes to the roadmaps and every indication that business remains robust with very high forward visibility, in line with all of our checks."
In a critical insight, Morgan Stanley notes:
"Any new Blackwell orders now that aren't already in queue will be shipped late next year, as they are booked out 12 months or so, which continues to drive strong short term demand for Hopper which will still be a major factor though the year."
Of course, the Wall Street titan has already stated that it sees NVIDIA shipping up to 450,000 units of the Blackwell GPUs in the December-ending quarter, resulting in between $5 billion and $10 billion in revenue.
Moreover, Morgan Stanley believes that NVIDIA will produce between 700,000 and 800,000 units of Blackwell GPUs in Q1'25, which corresponds to a 3x sequential increase in volumes. At the same time, the bank sees Hopper volumes at 1.5 million units in Q4'24, and at around 1 million units in Q1'25.
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