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NVDA Stock Alert: Amazon Halts Orders of Nvidia Superchip

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NVDA stock - NVDA Stock Alert: Amazon Halts Orders of Nvidia Superchip

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Semiconductor juggernaut Nvidia (NASDAQ:NVDA) has had a slow session on Tuesday. Driving the pensiveness in NVDA stock is news that e-commerce giant Amazon (NASDAQ:AMZN) halted its orders of a so-called โ€œsuperchip.โ€ Instead, Amazon will await an updated version. That has Wall Street worried about Nvidiaโ€™s product cycle vulnerability ahead of a critical earnings test.

According to the Financial Times, Amazon Web Services recently stopped its order of Nvidiaโ€™s Hopper chips. Instead, the business unit will wait for the semiconductor firmโ€™s latest Blackwell processors. Earlier this year, in March, Nvidia announced Blackwell at its GPU Technology Conference. At the time, Nvidia CEO Jensen Huang called Hopper โ€œthe most advanced GPU in the world in production today.โ€

At the same time, Huang also admitted that the company (and industries overall) need bigger graphics processing units or GPUs. These advanced processors help power generative artificial intelligence systems, which are incredibly energy consumptive.

Of course, what has raised alarms is that AWS is the largest cloud computing provider in the world, per Quartz. If the Amazon unit decided to wait, itโ€™s possible that other enterprises will too. And this framework may yield less-than-expected demand.

NVDA Stock Faces a Litmus Test

Fundamentally, the news couldnโ€™t have come at a more distracting time for NVDA stock. Tomorrow after the closing bell, Nvidia is scheduled to release its results for the first quarter of fiscal 2025. To be sure, no one doubts the importance of Nvidiaโ€™s innovations and its quarterly track record speaks for itself. However, the concern now is maintaining this blistering pace.

Per Yahoo Finance, for fiscal Q1, analysts anticipate that earnings per share will land at $5.59 on revenue of $24.65 billion. Thatโ€™s a dramatic leap from the year-ago quarterโ€™s results of 98 cents per share on sales of $6.52 billion.

Interestingly, since fiscal Q2 of last year, Nvidiaโ€™s earnings surprise โ€“ or the magnitude by which actual EPS compares against analystsโ€™ consensus projections โ€“ has been steadily fading, from 29.2% to 11.4%. This dynamic adds to concerns that NVDA stock may be overstretched.

In fairness, not everyone is fretting about earnings and the Hopper to Blackwell transition cycle. KeyBanc analyst John Vinh stated that the financial firm sees โ€œlimited signs of a demand pause.โ€ However, Morgan Stanley analysts took the opposite view, warning its clients about a โ€œpotential air pocketโ€ in the demand transition.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.ย The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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