Why Worries About an ‘Air Pocket’ in Demand for Nvidia’s AI Chips Could Be Overblown

Amazon (AMZN) reportedly changed plans for some Nvidia (NVDA) orders to wait for the upcoming Blackwell platform, adding fuel to worries Nvidia could face an “air pocket” in sales as some customers wait for its latest tech, but experts have been steadfast in their bullish stance on the AI darling and demand for its products.

Amazon’s cloud platform Amazon Web Services (AWS) changed some of its planned orders from Nvidia to wait for Nvidia’s Blackwell super chip rather than use its predecessor, Grace Hopper, according to reports from Reuters and the Financial Times Tuesday. AWS reportedly told Reuters it continues to offer other services based on Nvidia’s Hopper chips, noting that the planned switch to Blackwell chips applies only to a project for a supercomputer that AWS and Nvidia are collaborating to build.

Nvidia launched the GH200 Grace Hopper platform in August of 2023, and unveiled the next-gen system, Blackwell, around seven months later. The chipmaker hasn’t set a specific date for the Blackwell launch, but said that the products will be available through partners, including Amazon, Microsoft (MSFT), and Alphabet (GOOGL), later this year.

Adding Fuel to ‘Air Pocket’ Worries

Ahead of the AWS order news and Nvidia’s earnings report after the bell Wednesday, UBS analysts noted that initial Blackwell shipment timing “has some investors concerned about the transition.”

Citi analysts also said some investors are focused on a “potential air pocket in AI demand in 2H24” as some customers might choose wait for the new Blackwell system to drop, which could negatively affect Nvidia’s sales.

Experts Suggest Concerns ‘Overblown’ as Demand Continues to Outpace Supply

However analysts have been largely unfazed by those concerns, with Barclays analysts writing that calls for an air pocket are “seemingly overblown.” Similarly, Rosenblatt analysts wrote that they “do not subscribe to the air-pocket theory in the Hopper to Blackwell transition for the July quarter guide as the transition to B100 is scheduled for later in 2024.”

Following the AWS news, CFRA analyst Angelo Zino told Investopedia that while “we could see some pause in orders ahead of Blackwell from hyperscalers,” CFRA sees “little risk of a major push-out as demand for AI servers continues to outpace supply.”

Amid the AI boom, Nvidia has struggled to come up with the supply to meet surging demand. Analysts have said they think there is already high demand for the new products and that Blackwell is likely sold out well into 2025 as Hopper supply improves.

Bulls May See Any Downdraft as an Opportunity

Firstrade President Don Montanaro told Investopedia that “it’s hard for me to read that key endorsement of Blackwell as bad news for Nvidia.”

He said that while Firstrade has seen some options trading clients anticipating a near-term pullback after Nvidia’s earnings announcement, clients overall “appear to be long-term bullish believers in Nvidia specifically, and in the AI thesis more broadly.”

Montanaro said that clients may “see any such downdraft as a discount-creating opportunity to establish or add to an Nvidia position.” He told Investopedia that he expects the long-term discussion about Nvidia among investors to be “who acquired it below $500 a share vs. who got in under $1000, or under $2000.”

Nvidia shares were 0.4% lower at $948.92 as of 11:45 a.m. ET Wednesday, though they’ve nearly doubled in value since the start of the year.