Morgan Stanley Explains NVIDIA’s Blackwell GPU Bottleneck, Predicts Strong Production Ramp-Up

Morgan Stanley provided new insights into NVIDIA’s recent Blackwell GPU production bottleneck, citing a minor design flaw as the cause. The issue, related to a photomask defect, has been resolved. The bank remains optimistic about NVIDIA's future, forecasting significant revenue and a strong production ramp-up for Blackwell GPUs.

Morgan Stanley Reveals Causes of NVIDIA's Blackwell GPU Bottleneck, Predicts Strong Revenue Growth

Amid substantial fund allocations into AI-related investment themes, Wall Street focuses on NVIDIA's expansion of Blackwell GPU production, which is regarded as a critical factor in the AI sector's ongoing expansion. Morgan Stanley issued a new note today that provides additional information regarding the factors contributing to a summer production bottleneck.

During its most recent earnings call, NVIDIA verified allegations of a minor design flaw in the Blackwell GPU architecture. The photomask, a template utilized to imprint patterns on semiconductor wafers, was modified to address the defect's decreased yields.

Morgan Stanley recently disclosed its production issue analysis, which indicates that the low-yield issue was only discovered during the post-packaging phase. NVIDIA's supply constraints were further exacerbated by the subsequent dismantling of defective units, which resulted in a loss of CoWoS and HBM3e components already in limited supply.

Nevertheless, the bank is optimistic, stating that these issues have been resolved and has high confidence in NVIDIA's projections for generating several billion dollars in Blackwell-related revenue by the January quarter. Morgan Stanley also observed a "quite robust" production ramp-up for Blackwell, with no significant alterations to the company's roadmap. Business conditions remain robust, with high forward visibility.

Morgan Stanley Predicts Blackwell GPU Backlog to Extend into 2025, Sustaining Demand for Hopper Units

According to Wccftech, Morgan Stanley emphasized in a critical observation that the 12-month backlog will prevent the fulfillment of new orders for Blackwell GPUs that are not already in the pipeline until late next year. This backlog is anticipated to sustain the short-term demand for NVIDIA's Hopper GPUs and will continue to be a significant factor throughout the year.

Morgan Stanley anticipates that NVIDIA will distribute up to 450,000 Blackwell GPUs during the December quarter, generating revenues ranging from $5 billion to $10 billion. The bank expects a substantial increase in production volumes for the first quarter of 2025, with an estimated 700,000 to 800,000 units of Blackwell GPUs. In the interim, it is anticipated that the volume of Hopper GPUs will exceed 1.5 million units in Q4 2024 and approximately 1 million units in Q1 2025.