- NVIDIA is reportedly in talks to bring production of Blackwell chips to the US.
- The good news won't have much impact on 2025 results, but the long-term outlook is improved.
- The real news is that NVIDIA may surprise the market by releasing the next-generation Rubin chips earlier than anticipated.
Reports that NVIDIA (NASDAQ:NVDA) could make its Blackwell chips are resonating throughout the semiconductor industry. The news is good for numerous reasons, but there are hurdles and risks to be overcome.
The good news is that a path to expanded Blackwell production and reduced geopolitical risk is clear. The bad news is that Taiwan Semiconductor (NYSE:TSM) isn’t 100% capable of manufacturing the chips in the United States, at least not yet.
NVIDIA Onshoring and Ramping Production of Blackwell
Onshoring the production of NVIDIA chips aligns with national interests and reduces geopolitical exposure to China, but this isn’t possible with this deal. TSMC’s Arizona facility is state-of-the-art but not equipped to produce CoWoS or Chip-on-Wafer-on-Substrate packaging, a proprietary process developed for high-intensity computing and AI needs. That means Blackwell chips will have to be shipped to Taiwan for completion, bringing geopolitical risk and many others back into the equation, but there is hope.
TSMC was awarded $6.6 billion in CHIPS Act funding as part of a total investment plan of $65 billion. The money will be used to build new facilities, which may include a new CoWoS facility critical to onshoring Blackwell production. The company is already considering new plants in Japan and the US to meet the increased demand and plans to double its production capacity more than once by 2026.
There is hope that a deal with Amkor (NASDAQ:AMKR) will meet NVIDIA’s needs between then and now. Amkor is a global supplier of microchip packaging services and will do CoWoS at Arizona facilities. TSMC and Amkor inked a deal earlier this year, and the first production facility plans are set. Early TSMC customers likely to benefit include Advanced Micro Devices (NASDAQ:AMD), NVIDIA’s most significant competition in AI GPU and CPUs, and Apple (NASDAQ:AAPL). The bad news is that the first phase won't be completed until 2027 or later, and the final stages are slated to open in the middle of the next decade.
NVIDIA Will Surprise the Market With Rubin in 2025
There is growing speculation that NVIDIA will surprise the market and release the next generation of AI technology six months earlier than anticipated. The news is strengthening the updraft in share prices and will likely result in persistent data center upgrades over the long term.
Rubin is expected to generate better outcomes because of AI-specific architecture, TSMC’s advanced 3nm manufacturing process, and next-generation HBM4 memory. The chips are expected to be more powerful, store exponentially more data, and work more efficiently than their predecessors. NVIDIA has also partnered with Schneider Electric to develop innovative cooling systems for its advanced GPU and CPU products.
MarketBeat hasn’t tracked analyst activity related to the TSMC/Arizona news, but the group is active in 2024, and the trends are positive. The analysts' coverage is rising; the sentiment is firm at a Strong Buy, and the consensus price target is increasing. The price target rose nearly 15% in November alone, and the revisions led to even higher price points. Consensus assumes about 15% upside from the critical support target while the high-end adds another 25%.
The price action is bullish in late 2024, with the stock at fresh all-time highs and showing support at a critical level. The critical level aligns with a previous all-time high and the top of a consolidation range. The next big move will likely be higher, with the critical resistance target near $150. A move above that level would likely trigger another momentum upswing and take the market up to the $190 to $200 range. 