To The Moon

Although Nvidia Corporation (NASDAQ:NVDA) reported fiscal 2025 Q2 results well above guidance, investors were disappointed with the guidance for fiscal Q3. This was mainly due to the delay in Nvidia’s next-generation AI accelerator chip for the data center, dubbed Blackwell. Rumors have swirled around the delay, and some incorrect or misleading information about Blackwell has been reported. In this article, I take a closer look at the Blackwell delay and what it means for Nvidia’s results in fiscal Q3 and Q4.

My take on the Blackwell delay

On August 2, The Information released a report that Nvidia’s Blackwell would be delayed by at least a quarter due to unspecified “design flaws.” Normally, when one hears about the design flaws of a chip, logic design problems or bugs come to mind. But Nvidia management made clear that this was not the case during their fiscal Q2 results conference call.

Instead, there was an issue with a mask that impacted chip yield, said CFO Colette Kress:

Hopper demand is strong and Blackwell is widely sampling. We executed a change to the Blackwell GPU mask to improve production yields. Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal year '26.

Presumably, the chip yield affects the number of good chips resulting from each silicon wafer fabricated by foundry partner TSMC (TSM). CEO Jensen Huang reiterated that there was nothing wrong with the functional design of the chip. The mask change did not change the functional logic of the chip.

Developing the mask to implement a given layer of circuitry on an advanced chip has become an enormously complex process. This is because at the extreme ultraviolet wavelength of 13.5 nm, diffraction effects and optical distortion mean that the light pattern produced on the chip doesn’t look like the mask.

Optical physicists try to work backwards from the desired pattern to predict what the mask should look like, depending on the EUV machine and other factors. The process is computationally intensive, and TSMC has invested in an Nvidia supercomputer to perform what is called “computational lithography.”

The process isn’t perfect, and the actual pattern produced by a mask may not match the computational lithography prediction. Since the issue is one of yield, this is probably what happened in the case of Blackwell, and why it’s going to take several months to find a more optimal mask solution and begin mass production.

Asa Fitch’s article in the WSJ reported on the Blackwell delay:

Nvidia hasn’t detailed the nature of the issue. But analysts and industry executives say its engineering challenges stem mostly from the size of the Blackwell chips, which require a significant departure in design.

I disagree with this interpretation. Nvidia has been making its flagship GPU accelerators (such as Hopper), at TSMC’s reticle limit, for years. This sets the maximum physical size of a chip that TSMC can produce using EUV lithography machines produced by ASML Holding (ASML).