Wall Street bets big on Nvidia but is Blackwell a ticking time bomb?

Nvidia (NASDAQ:NVDA) stock has risen significantly due to robust demand for its leading AI chips, giving the company a commanding market share exceeding 80% in the AI chip sector.

Despite its leading position, Nvidia faces investor concerns as the stock struggles to gain traction this year amid uncertainties about its upcoming Blackwell GPU architecture. Initially scheduled for mass production in the fourth quarter of 2024, reports indicated that Blackwell encountered a design flaw. Nvidia claimed to have rectified the issue, but subsequent reports suggest that major customers are deferring their orders due to overheating issues associated with the Blackwell GPUs.

The delay in the Blackwell rollout contributed to a significant revision in Super Micro Computer’s (NASDAQ:SMCI) fiscal year 2025 revenue forecast, which is now $3.75 billion lower than previous guidance. Super Micro’s management indicated they have yet to receive an allocation for the GB200 chips.

Analyst KC Rajkumar from Lynx Equity raised concerns regarding Nvidia’s assertions at the Consumer Electronics Show (CES) last month, where the CFO stated that “all is on track” and mentioned collaboration with partners on liquid cooling. Rajkumar noted the contradiction presented by Super Micro, a leader in liquid cooling technology, who reported a lack of GB200 allocations, suggesting potential further delays in Blackwell shipments.

During Super Micro’s June quarter earnings call, management expressed uncertainty about whether Blackwell would ship in the December quarter. As of the March quarter, they still lack visibility regarding the availability of the GB200, leading Rajkumar to conclude that Super Micro’s management appears to have removed Blackwell from their fiscal year 2025 revenue outlook, which presents negative implications for Nvidia.

Super Micro dodges delisting: Can it regain Wall Street’s trust?

Nevertheless, the consensus on Wall Street remains predominantly positive regarding Nvidia. The stock currently holds a Strong Buy consensus rating, supported by 37 Buy recommendations and only 3 Hold ratings. The average price target is $178.86, indicating potential 12-month returns of 32%.

In a striking turn of events, Super Micro forecasts $40 billion in sales by fiscal 2026, surpassing Wall Street’s estimate of $30.7 billion. This ambitious target is driven by an increased demand for AI-optimized servers, particularly those utilizing Nvidia’s upcoming Blackwell B200 chips. However, Super Micro has revised its fiscal 2025 revenue target down to $24.3 billion, from an initial $28 billion, following missed sales and profit estimates in its latest quarterly report.

Despite regulatory challenges, Super Micro’s stock experienced a 7.4% increase recently, amid a $700 million convertible notes offering aimed at funding expansion and enhancing their AI infrastructure. The company is also addressing regulatory scrutiny, including a compliance deadline from Nasdaq after failing to file its annual financials. The U.S. Department of Justice and SEC are investigating, although an independent review found no evidence of misconduct, leaving lingering questions about governance and transparency.

Featured image credit: Nvidia