Nvidia’s latest revenue forecast sparked concerns on Wall Street about a potential slowdown in the AI boom, but the company, analysts, and investors remain optimistic. Nvidia continues to see robust demand for its AI-optimised chips, selling them as quickly as Taiwan Semiconductor Manufacturing Co (TSMC) can produce them.
However, Nvidia predicted its slowest revenue growth in seven quarters, leading to a 2.5% dip in after-hours trading. Supply chain constraints are expected to keep demand ahead of supply through fiscal 2026.
Challenges in manufacturing advanced chips
Nvidia’s new flagship chip, Blackwell, faces manufacturing hurdles due to its advanced packaging process, which involves assembling multiple chips together. This process, handled by TSMC, has become a bottleneck as the company races to expand capacity.
“Blackwell adds more advanced packaging from TSMC than prior chips, which adds complexity,” Ben Bajarin, CEO, Creative Strategies, said. He anticipates Nvidia will face supply shortages throughout 2025.
A design flaw discovered in Blackwell earlier this year exacerbated these issues. Nvidia had to make a “mask change” to correct the flaw, impacting chip yields and delaying production. CEO Jensen Huang acknowledged the setback, emphasising that ramping up production for such complex chips inherently faces physical and logistical limits.
Production and financial impacts
Despite these challenges, Nvidia shipped about 13,000 Blackwell samples and expects to exceed its initial revenue projections for the chip this quarter. However, the production ramp-up is pressuring gross margins, which Nvidia executives predict will temporarily fall to the low-70% range.
Hendi Susanto, a portfolio manager at Gabelli Funds, highlighted that demand remains “absolutely and exceptionally strong.” The key question, he noted, is how much supply Nvidia can generate to meet this demand.
While Nvidia’s near-term growth is constrained by supply issues, the company remains positioned at the forefront of the AI industry. Analysts agree that demand for its cutting-edge chips shows no signs of slowing, with long-term prospects still appearing bright.
With inputs from Reuters
