TLDR:
- Nvidia fixed a critical production issue with new Blackwell AI chips
- Initial delay moved shipping from Q2 to Q4 2024
- Issue affected manufacturing yields but not chip performance
- Partnership with TSMC proved crucial in resolving the problem
- Company expects billions in Q4 revenue from Blackwell sales
Manufacturing challenges with Nvidia’s latest artificial intelligence chips have been resolved, marking the end of a production delay that temporarily concerned major tech customers and investors.
CEO Jensen Huang confirmed today that the company’s highly anticipated Blackwell AI chips are now ready for full-scale production.
The semiconductor manufacturer encountered a significant yield problem earlier this year with its new Blackwell platform, pushing the release from the second quarter to the fourth quarter of 2024. Speaking at a technology event in Copenhagen, Huang openly addressed the situation, taking full accountability for the manufacturing setback.
The issue centered around a design flaw that, while not affecting the chips’ core functionality, resulted in lower production yields than expected. This technical hurdle particularly impacted the manufacturing process, where seven distinct chip designs needed to be produced simultaneously for the Blackwell platform to function correctly.
During the announcement, Huang emphasized the complexity of the project.
“In order to make a Blackwell computer work, seven different types of chips were designed from scratch and had to be ramped into production at the same time,”
he explained, highlighting the technical challenges involved in the manufacturing process.
The revelation of production difficulties first surfaced in August, causing Nvidia’s stock to experience an 8% decline. Major customers, including Microsoft, Google, and Meta Platforms, faced potential delays in receiving their orders of the advanced AI chips, which are crucial for their operations.
Taiwan Semiconductor Manufacturing Company (TSMC), Nvidia’s long-standing manufacturing partner, played a pivotal role in resolving the yield issues.
Huang praised TSMC’s swift response and expertise, stating they helped resume Blackwell manufacturing “at an incredible pace.” He also dismissed reports of tension between the two companies as inaccurate.
The Blackwell platform represents a significant leap forward in AI processing capabilities. By combining two silicon squares into a single component, these chips deliver processing speeds 30 times faster than previous models, particularly for AI applications like chatbot operations and large language model processing.
Financial markets have responded positively to the resolution. Despite a brief 2.9% decline in share price following the announcement, Nvidia’s stock has demonstrated remarkable strength throughout 2024, posting gains of approximately 189% year-to-date.
During Nvidia’s second-quarter earnings report, the company disclosed modifications to Blackwell’s GPU mask aimed at improving production yield. Huang clarified that these adjustments didn’t require any functional changes to the chip design itself.
Customer demand for the Blackwell chips remains exceptionally strong. In a recent television appearance, Huang described the market interest as “insane,” noting intense competition among customers to secure early access to the technology.
The company projects substantial revenue from Blackwell sales in the fourth quarter, with expectations reaching several billion dollars. This forecast suggests strong market confidence in the platform despite the earlier production delays.
Nvidia made the announcement during the launch of Denmark’s first AI supercomputer, named Gefion. The system, featuring 1,528 GPUs, demonstrates the company’s continued commitment to advancing high-performance computing infrastructure globally.
The successful resolution of the manufacturing issues reinforces Nvidia’s position as a leader in AI chip technology. The company’s ability to quickly address and overcome technical challenges while maintaining transparent communication with stakeholders has helped maintain market confidence.
Nvidia’s stock recently achieved a record high of $143.71 per share, reflecting investor optimism about the company’s future prospects and its ability to meet growing demand for AI processing capabilities.