Supply constraints represent a risk for NVIDIA Corp (NASDAQ:NVDA, ETR:NVD) going into its earnings report due on Wednesday amid high expectations for the chipmaker.
Analysts at Baird highlighted that NVIDIA’s products, particularly its GB200 chip, are in high demand from hyperscalers like Meta, Azure and AWS but the company’s ability to ship these products is limited by its production capacity.
Expected to be a major revenue driver, the GB200 has been delayed due to a redesign, pushing its launch back to January 2025.
“Supply could potentially restrain 3Q revenue outlook, representing a risk into earnings, in our view, given strong expectations into earnings,” analysts wrote.
“Demand remains very strong and we operate under the assumption that an estimated $2 billion to $3 billion in revenue shortfall later this year due to the GB200 push out will be offset by B200A and H100 demand.”
Competitor dynamics, specifically AMD reducing its CoWoS capacity allocation at TSMC worth an estimated $2 billion to $2.5 billion, could benefit NVIDIA, they added.
“Unless Nvidia is able to get incremental capacity, current CoWoS allocation to Nvidia suggests about $105 billion in datacenter revenue this year, offering no upside to consensus, representing a risk for the stock,” they wrote.
They repeated their ‘Outperform’ rating on NVIDIA but noted that there are two key ingredients are required for the stock to achieve sustainable upside.
Analysts suggest that for the stock to achieve sustainable upside, two key factors are needed in addition to a positive earnings beat and slight guidance raise: an increase in CoWoS production capacity for the remainder of the year, and confirmation that the GB200 project is not delayed beyond January.
Baird analysts awarded NVIDIA a price target of $120 with a multiple at the high end of peers’ range due to the company's strong positioning in AI datacenter markets and share gains.
Shares of Nvidia traded down 1.8% at $127 on Monday afternoon. The stock has gained about 170% in the year to date.