Nvidia's Blackwell Chip Potential Signals Strong Future Growth: Analysts

Nvidia Corp’s NVDA push to maintain its lead in artificial intelligence chips involves a new line of larger, more complex processors called Blackwell, according to analysts.

These chips are nearly double the size of their predecessors, packing 2.6 times more transistors, the Wall Street Journal reports.

However, this ambitious leap has led to significant manufacturing challenges, WSJ noted, impacting Nvidia’s profit margins and contributing to a $908 million provision.

During its recent earnings call, the company acknowledged these hurdles, announcing design adjustments to improve production yields.

A significant flaw can make a $40,000 Blackwell chip unusable, severely impacting manufacturing yields.

G. Dan Hutcheson, vice chair of TechInsights, told WSJ that the main challenge is getting these chips to function cohesively, as low yields in individual parts can lead to quick overall failure. Lisa Su, CEO of Advanced Micro Devices Inc AMD, told WSJ that future complexity will rise as chipmakers stack more silicon layers for increased performance.

Analysts rerated Nvidia after its upbeat second-quarter print.

Wedbush analyst Matt Bryson reiterated an Outperform on Nvidia with a price target of $138.

Nvidia reported $30 billion in second-quarter sales driven by data center sales, which is in line with Bryson’s revised estimate, while management guided for $32.5 billion in revenues in the third quarter, which was just above his outlook.

Regarding Blackwell delays, management described a change to the Blackwell mask to improve yields, the analyst flagged.

Bryson noted that Nvidia expects shipments to ramp up in the fourth quarter, eying revenue worth several billion dollars for Blackwell this year. Gross margins will likely be in the mid-70s for fiscal 2025.

He added that Hopper revenues will likely grow in the second half of fiscal 2025, as Nvidia indicated. While the stock dropped meaningfully after hours, Bryson did not note anything in numbers or in Nvidia’s commentary that was concerning or suggested any slowing in momentum fundamentally.

Bryson calculated his price target by applying a price-to-earnings multiple of ~36x to his fiscal 2026 EPS estimate of $3.78 plus net cash of $1.01 per share. Bryson projects third-quarter revenue and EPS of $32.50 billion and 73 cents.

Rosenblatt analyst Hans Mosesmann maintained a Buy rating with a price target of $200.

Mosesmann noted that Nvidia reported a solid beat and raise on Hopper’s generative AI and networking momentum, offset by slightly lower gross margins in the outlook due to Blackwell’s start-up ramp for the January quarter.

Blackwell is undergoing a mask update to improve yields, but interestingly, the analyst said there will be no change to the January quarter revenue ramp going through the next fiscal.

Mosesmann argued that the company’s GPU roadmap is driven by accelerated computing, which has a significant ROI compared to general-purpose computing, and generative AI, which is still in its early stages of deployment.

Given Blackwell’s roadmap for the 2026 calendar year, the analyst remains bullish on the stock.

Mosesmann noted unconstrained fiscal 2027 EPS of $4.50 and applied a ~44x PE multiple, which drives his price target within Nvidia’s historical 37x-69x forward PE range, backed by more robust Data Center demand dynamics. Mosesmann projects third-quarter revenue and EPS of $32.50 billion and $0.73.

Price Action: NVDA stock traded up 0.14% at $117.84 at the last check on Friday.

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