Dell's Early Blackwell Shipments Of 'Thousands Of GPUs A Week' May Lift Nvidia Margins, Boost Q2 Guidance

As Nvidia Corp. NVDA prepares to report its first-quarter earnings on Wednesday, investor attention remains fixed on the fallout from the U.S. export restrictions on chip sales to China. However, the chipmaker may have a few surprises in store.

What Happened: On Tuesday, Nvidia published a blog post on one of Dell Technologies Inc.’s DELL U.S. factories, which it says can ship “thousands of Blackwell GPUs to customers in a week.”

Dell’s partnership with Nvidia essentially involves supplying racks, cooling, and storage, mounted with the latter’s prized GPUs. Volume growth reported by Dell can thus be seen as a reflection of demand dynamics in AI infrastructure, while also serving as a proxy for Nvidia’s momentum.

In the blog post, Nvidia mentions an order for 100,000 units of Blackwell GPUs by CoreWeave Inc. CRWV, which is set for delivery within the next 6 weeks, worth over $3 billion.

This comes amid the export curbs on China, which are expected to hit the company’s earnings to the tune of $5.5 billion, resulting in its first earnings estimate decline in years.

In addition to geopolitical headwinds, the company was weighed down by persistent technical issues with the GB200 Blackwell racks, resulting in delayed shipments.

However, these issues were resolved by the company’s partners, Hon Hai Precision Industry Co. Ltd. HNHPF, Inventec Corp., Wistron Corp., and Dell Technologies through a series of technical breakthroughs, allowing them to ramp up production towards the tail end of the first quarter, according to a report by the Financial Times.

While analysts expect the company’s gross margins to drop from 71% to 58% as a result of the China hit, even just a sliver of the high-margin Blackwell silicon accruing towards the end of the quarter can help soften the blow.

Similarly, these factors should help the company provide a better-than-expected guidance for the second quarter, as it begins shipping the GB200 racks at volume.

Why It Matters: In addition to this, Nvidia has unlocked several other tailwinds in recent weeks that should help offset the losses from China export curbs.

Starting with a potential $7 billion chip deal with Japan, in a bid to reduce the nation’s massive trade surplus with the United States, which stands to benefit the company significantly.

This comes just days after a mega 18,000-chip deal with Saudi Arabia’s AI startup, Humain, backed by the Kingdom’s Public Investment Fund.

The company also plans to release a significantly cheaper AI chip for the Chinese market, in a bid to circumvent U.S. export restrictions.

This, however, is expected to take a while to materialize, with the company saying that “until we settle on a new product design and receive approval from the U.S. government, we are effectively foreclosed from China's $50 billion data center market.”

Price Action: Nvidia shares were up 3.21% on Tuesday, trading at $135.50, and are up 0.09% after hours, ahead of the company’s first quarter earnings release. Dell shares were up 1.68% on Tuesday, trading at $113.99, and are down 0.34% after hours.

Nvidia scores remarkably well across several key metrics in Benzinga’s Edge Stock Rankings, with a favorable price trend in the short, medium, and long term, but how does it compare with AMD? Click here to find out.

• Nvidia’s Blackwell AI Servers Are Back In Production After Key Supply Chain Partners Like Foxconn Fix Overheating Issues: Report

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