We’re positive the stock market won’t agree but...

HEADLINE: "Nvidia Reportedly Delays Next-Generation Blackwell AI Chip; Big Implications For Sector"

NEWS EXCERPT, Investor's Business Daily, 08/04/24: "Nvidia (NVDA) reportedly is delaying its next-generation artificial intelligence chips by at least three months. Mass shipments may not take place until early 2025."

"Nvidia told Microsoft (MSFT) and another key cloud customer that its Blackwell B200 AI chips will be delayed due to a design flaw found late in the production process, The Information reported Saturday, citing a Microsoft employee and other source."…"An Nvidia spokesperson wouldn't comment on reports of a delay, telling The Information in an emailed statement that "production is on track to ramp" later this year."

OUR TAKE: We're positive the stock market won't agree but in a rational world (with a long-term view) this could actually be viewed as good news for the company and here's 3 reasons why:

1. Competitive Barrier: This Nvidia evolutionary step is simply too important to be wrong on...perhaps the most advanced GPUs ever designed with a nanoscale that really puts the stress tests on all aspects of production, from the raw materials, to the design itself, to the fabrication and computational lithography platforms performing first-time-ever tasks, etc., etc...imagine how difficult this entire process will be for virtually any competitor to replicate.

2. Grow the Installed Base: This could extend the runway for the existing H100 GPU or the A100, both of which already have overwhelming demand, and could lead to additional clustered combination versions. AND what happens when you sell more H100s and A100s? ... yep, you add to the installed base of hardware that will then be part of the Nvidia upgrade queue in a few years.

3. “More compute, please” The tens of billions ($) in pre-orders from just the top 5-6 hyperscalers alone in this 'early stage' when there are no killer B2B or B2C apps, or mission-critical needs tell us the hyperscalers have no other options -- Nvidia wins. Imagine when just a few corporate enterprise clients or supply chain clients or pharmaceutical clients report they are seeing a very real impact with AI on business processes or improved margins and they need “more compute, please”.

A couple of months' delay could be a blip on Nvidia's overall curve.