Nvidia Amplifies TSMC Orders Amid Soaring Blackwell AI Chip Demand
Nvidia Corporation is experiencing a surge in demand for its next-generation Blackwell chips, prompting the company to seek increased manufacturing support from Taiwan Semiconductor Manufacturing Company (TSMC). This request encompasses not only graphics processors but also other essential components to support Nvidia’s expanding product lineup.
Nvidia’s Expanding Product Portfolio
Recently, at an event in Taiwan, Nvidia’s Chief Executive, Jensen Huang, shared insights about the new Blackwell platform. He emphasized that the platform includes a variety of components, including:
- Graphics Processing Units (GPUs)
- Central Processing Units (CPUs)
- Networking parts
- Switches
This extensive range necessitates additional chip production from TSMC to fulfill growing orders. TSMC’s Chief Executive, C.C. Wei, confirmed Nvidia’s request for increased wafer capacity, although specific quantities were not disclosed.
Market Demand and Performance
Nvidia has seen a notable interest from clients on a global scale. In October, the company made history by becoming the first to achieve a $5 trillion market valuation. Wei recognized Huang’s pivotal role in this extraordinary accomplishment. Following this positive momentum, Nvidia’s stock experienced a modest increase, closing at $188.15.
Challenges in Memory Supply
Alongside the demand for chips, Nvidia also faces challenges related to memory supply. The company collaborates closely with three major suppliers:
- SK Hynix
- Samsung Electronics
- Micron Technology
Huang indicated that all three suppliers are expanding their capacity and have provided Nvidia with advanced chip samples. However, supply is projected to remain tight as SK Hynix announced it has sold out its chip production for the upcoming year. To address the future demand driven by AI, SK Hynix plans to increase its investments.
Samsung’s Collaboration with Nvidia
Samsung is also actively negotiating with Nvidia regarding the supply of the next round of high-bandwidth memory known as HBM4. When addressing memory pricing, Huang mentioned that pricing strategies are left to each supplier’s discretion, adding that current demand remains robust across various segments of the chip market.
Sales Restrictions in China
It is important to note that Nvidia is currently not selling Blackwell chips to China. The U.S. government has imposed restrictions to prevent advanced chips from being supplied to China’s military and AI developers. Huang stated that there are no ongoing discussions to alter this policy at present.
Path Forward for Nvidia
In summary, Nvidia is actively collaborating with TSMC and major memory suppliers to scale up its production capabilities. This strategy is essential to meet the demands of AI developers worldwide. With orders on the rise, Nvidia is increasingly relying on its primary partners to meet the escalating global demand for chips.
Despite these challenges, Nvidia maintains a strong consensus rating from analysts, who classify the stock as a Strong Buy. The average price target for Nvidia is forecasted at $237.35, indicating a potential upside of 26.15% from its current trading price.
