(Reuters) – Nvidia’s major clients are reportedly postponing orders of the AI chip leader’s latest ‘Blackwell’ racks due to concerns over overheating, as per a report by The Information on Monday. The Information stated that the initial shipments of racks featuring Blackwell chips have experienced overheating and connectivity issues between the chips. These racks are used in data centers to house essential equipment like chips and cables.
Shares of the Santa Clara, California-based company declined more than 4% in early trading following the news. Additionally, the U.S. government announced earlier in the day its intentions to impose further restrictions on exports of AI chips and technology, a move that could potentially impact Nvidia’s sales.
Notably, key customers including Microsoft, Amazon.com’s cloud division, Alphabet’s Google, and Meta Platforms have reportedly scaled back their orders for Nvidia’s Blackwell GB200 racks. The report suggested that these “hyperscale” clients had each initially placed orders exceeding $10 billion for the Blackwell racks. Some of these customers are now considering alternative options, either waiting for updated versions of the racks or opting for Nvidia’s older AI chips.
Microsoft, for instance, had plans to deploy GB200 racks with at least 50,000 Blackwell chips in one of its facilities in Phoenix, according to the report. However, due to delays, the company had to adjust its strategy at the request of partner OpenAI, opting to use older Nvidia ‘Hopper’ chips instead.
Nvidia and Amazon have refrained from providing comments on the situation, while Microsoft, Google, and Meta have yet to respond to requests for statements from Reuters.
Despite the reported setbacks with the Blackwell racks, Nvidia CEO Jensen Huang expressed optimism about surpassing revenue projections for the fourth fiscal quarter, which included substantial earnings expected from Blackwell chips. Huang also dismissed previous media reports of a liquid-cooled server featuring 72 of the new chips encountering overheating issues during initial testing.
It remains uncertain how the reduction in orders from major clients will impact Nvidia’s overall sales, with the report suggesting that there may still be interest from other buyers for the ‘glitchy’ GB200 server racks.
The article was reported by Arsheeya Bajwa in Bengaluru and edited by Shreya Biswas.
