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In a note to clients Wednesday, Lynx Equity Strategies raised concerns about a potential shift in Nvidia's (NASDAQ:NVDA) GPU market dynamics from shortages to surpluses.
As TSMC aggressively expands its CoWoS capacity, the rapid increase in GPU supply has prompted Lynx to question when current constraints might turn into an excess.
The firm notes that recent supply chain reports indicate decreasing lead times for Nvidia’s H100 GPUs. While companies like Amazon’s AWS have reported supply shortages, Microsoft’s recent earnings call did not highlight any near-term supply issues.
Additionally, they explain that pricing for Nvidia server usage has been falling, both on a per-hour and per-token basis. Despite this, the pricing of Nvidia-based OpenAI APIs remains significantly higher than Google’s TPU-based APIs, suggesting that Nvidia may need to further ramp up supply to remain competitive.
With the upcoming B100 GPU launch, Lynx anticipates that concerns over a supply glut may soon surface. They highlight that the market might start worrying about this potential oversupply as the ramp approaches. Although Lynx remains supportive of Nvidia in the near term, especially with potential catalysts like Apple (NASDAQ:AAPL)'s WWDC, they caution that the stock could struggle post-event if the semiconductor sector stalls.
Lynx suggests that Nvidia's long-term future lies not in supplying merchant chips but in designing and maintaining purpose-built data centers for specialized industrial applications. However, this transition is expected to take at least a year. In the meantime, investors should be aware of the rising GPU supply and the competitive pressure from alternatives like Google’s TPU
