TLDR:
- Nvidia stock has shown strong historical performance in Q1, with positive returns in 20 out of 25 first quarters since IPO
- South Korean President Yoon Suk Yeol briefly declared and then lifted martial law, creating uncertainty in a key chip supply region
- Nvidia faces supply constraints for Blackwell GPUs that will continue into several quarters of next year
- SK Hynix and Samsung Electronics, crucial memory chip suppliers for Nvidia, could face production challenges amid political uncertainty
- Wall Street expects Blackwell sales to contribute $3-5 billion to Q4 revenue, projecting growth to $62 billion in 2025
Nvidia’s ambitious plans for its new Blackwell GPU lineup are encountering fresh challenges as political tensions in South Korea raise concerns about memory chip supply chains. The semiconductor giant’s stock experienced volatile trading Tuesday amid news of a brief martial law declaration in South Korea, a crucial hub for memory chip production.
South Korean President Yoon Suk Yeol caused market jitters by declaring martial law early Tuesday, citing a need to “eradicate pro-North Korean forces.” The declaration, which was quickly lifted following opposition from the National Assembly, marked the first such action since 1979 and created uncertainty in the region’s semiconductor industry.
The political upheaval comes at a critical time for Nvidia, which relies heavily on South Korean manufacturers for essential memory components. SK Hynix, a major supplier of high-bandwidth memory chips, has been working to accelerate production of its newest HBM4 chips at Nvidia’s request to support Blackwell GPU production.
SK Hynix’s planned $6.8 billion investment in a new chip plant near Seoul now faces potential delays or complications due to the political situation. The facility, intended to be built in Yongin, was positioned as a cornerstone of the company’s future growth strategy.
Despite recent strong performance in South Korea’s semiconductor sector, with November exports rising 30.8% year-over-year to $12.5 billion, the current political crisis threatens to disrupt this momentum. The uncertainty has pushed South Korea’s Won to its lowest level against the U.S. dollar in three years.
Samsung Electronics, another potential supplier for Nvidia’s memory chip needs, may also face production challenges. The company has been positioning itself to compete with SK Hynix in supplying HBM3 memory chips to Nvidia.
Nvidia’s Chief Financial Officer Colette Kress addressed supply chain concerns at the UBS Global Technology and AI Conference in New York. She noted that demand remains strong, driven by increasing model sizes and inference complexity.
However, Kress warned that Blackwell supply constraints would persist “well into our next fiscal year for several quarters.” This timeline suggests potential impacts on Nvidia’s growth trajectory throughout 2024.
Wall Street analysts maintain optimistic projections for Blackwell’s market impact, expecting the new GPU line to generate between $3 billion and $5 billion in fourth-quarter revenue. Looking ahead, analysts project total revenue to reach $62 billion in 2025 and $97 billion in 2026.
The stock’s historical performance has been notably strong in first quarters, with positive returns in 20 out of 25 first quarters since its 1999 IPO. The average Q1 gain stands at 19%, with recent years showing particularly robust growth.
Last year marked Nvidia’s strongest first-quarter performance, with a 90% stock price increase. The first quarter of 2024 followed as the second-best, delivering an 82.5% gain.
Over longer periods, Nvidia’s track record remains impressive. The company has delivered positive returns in 17 of 23 three-year periods since its IPO, averaging around 195% returns. Five-year holding periods have been even more rewarding, with 19 out of 21 periods showing gains and an average return of 551%.
Nvidia’s stock closed at $139.13, up 0.4% in Tuesday’s trading session, reflecting investor uncertainty about the impact of recent events on the company’s supply chain and growth prospects.
The evolving situation in South Korea, combined with existing supply constraints, presents near-term challenges for Nvidia’s Blackwell production goals. These factors could influence the company’s ability to meet strong market demand for its latest GPU technology.
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