Nvidia’s AI Chip Debacle: Overheating Issues Stall $10 Billion Orders from Tech Giants
Nvidia’s Blackwell GB200 racks face overheating issues, causing tech giants like Microsoft and Amazon to delay $10B orders. Explore the implications for Nvidia’s AI dominance.
Santa Clara, CA – Nvidia’s latest AI chip innovation, the Blackwell GB200 racks, is facing significant setbacks as overheating and connectivity glitches disrupt early shipments, according to a report from The Information. The tech powerhouse, celebrated for its leadership in AI chips, saw its shares tumble over 4% in early trading on Monday following the revelations.
Major Tech Players Delay Orders
Top-tier customers, including Microsoft, Amazon Web Services (AWS), Google, and Meta, have reportedly scaled back or postponed orders worth over $10 billion collectively. These hyperscalers had initially placed massive orders for the Blackwell racks, which are critical components in data centers housing chips, cables, and other essential equipment.
However, issues with overheating and faulty interconnectivity between chips in the racks have prompted delays. According to the report, some customers now prefer to wait for an updated version or opt for Nvidia’s older AI chips instead.
Microsoft and OpenAI Adjust Plans
Microsoft, a key Nvidia client, had ambitious plans to deploy GB200 racks featuring at least 50,000 Blackwell chips at its Phoenix data center. However, these plans hit a snag. OpenAI, a pivotal Microsoft partner, requested an alternative—Nvidia’s older-generation Hopper chips—to sidestep the delays and maintain their operations.
Export Restrictions Add to Nvidia’s Troubles
Further complicating matters, the U.S. government announced plans to tighten restrictions on AI chip and technology exports, a move that could impact Nvidia’s global sales. Despite these challenges, the company remains optimistic about surpassing its fourth-quarter revenue targets, which are projected to include billions from Blackwell chip sales.
In November, CEO Jensen Huang dismissed earlier reports of overheating issues in flagship liquid-cooled servers featuring 72 Blackwell chips during initial testing. Nevertheless, the current hurdles cast uncertainty on how the order cuts will affect Nvidia’s bottom line.
What Lies Ahead for Nvidia?
Although Nvidia faces potential losses from hyperscalers scaling back orders, other buyers may emerge for the problematic GB200 racks. The long-term impact on Nvidia’s market dominance remains unclear, but the company’s ability to address these challenges swiftly will be critical in sustaining its leadership in the AI hardware space.
Source: (Reuters)
(Disclaimer: The information in this article is based on reports from credible sources and reflects the latest developments at the time of publication.)