Nvidia guidance likely to be driven by H200 demand, Morgan Stanley says

Nvidia (NASDAQ:NVDA) is slated to report second-quarter results after the close of trading on Wednesday, and investor attention will be on both the results and the guidance. Morgan Stanley believes the guidance will be driven by demand for its H200 chips, even in light of a slight delay in its upcoming Blackwell line of GPUs.

“So for at least some customers, the preference has been to get more Hoppers, where supply was starting to ramp down,” analyst Joseph Moore wrote in an investor note. “So as HBM3e is the binding constraint, that supply can be shifted over to Hopper to drive up higher H200 volume. The H200 (essentially a midlife kicker for Hopper with higher memory content and a shift to HBM3e) has been popular, but has been bottlenecked by HBM3e allocation to hoppers.”

Moore has an Overweight rating and $144 price target on Nvidia.

Turning to Blackwell, Moore said there is likely to be “some volume” in the coming quarter, with a “more material ramp” in the quarter after that. A number of third-parties, including Super Micro Computer (SMCI) Chief Executive Officer Charlies Liang, have all but confirmed that Blackwell line of GPUs will be a delayed slightly.

“We expect initial volumes in the October quarter, as the initial product is functional but with somewhat lower yields, and we still expect a volume ramp of the next revision of silicon through January – all of which is still within the broad brush strokes of guidance,” Moore added.

Nvidia’s Blackwell line was introduced in March 2024 at the company’s annual GTC event.

Despite the slight delay for Blackwell, customer enthusiasm for the product line is “at very high levels,” Moore said, despite other companies such as AMD (AMD) and Intel (INTC) making inroads into the artificial intelligence accelerator market.

China ramp

While much attention will be placed on the H200 and Blackwell offerings, Nvidia’s continued presence in China — via its H20 GPU — is also likely to warrant some attention, Moore said.

“Per our checks in Asia a few weeks ago, we think that H20 builds have increased to something like 1.2 million units for the year, at an average selling price of $13-$15k,” Moore explained. “We’re not sure that they sell all of that, but demand for the H20 does appear to be strong per conversations with China hyperscalers, so we see H20 as more than $10 [billion] of revenues over the next three quarters. The gross margins of H20 are lower, which is one of the reasons for guidance for some margin compression (the other reason was the lower margins of Blackwell products). But we think that this is getting blown out of proportion.”