NVIDIA's Blackwell Shift: A Margin Hit, But Recovery Ahead

NVIDIA's recent launch of the Blackwell platform has sent ripples through the tech industry, with Bank of America (BofA) warning that the shift is taking a toll on the company's margins. However, the bank also forecasts a recovery in the second half of the year. Let's dive into the details and see what this means for investors.



The Blackwell Shift: A Margin Hit

NVIDIA's Blackwell platform is a game-changer, designed to enable real-time generative AI on trillion-parameter large language models (LLMs) at up to 25x less cost and energy consumption than its predecessor. However, the launch has come at a cost. According to BofA, the shift to Blackwell is hitting NVIDIA's margins hard. The company's gross margin for the fourth quarter of 2025 was 73.0% under GAAP and 73.5% under non-GAAP, a decrease of 1.6 and 1.5 percentage points respectively from the previous quarter. This decrease can be attributed to the high cost of producing and launching the Blackwell platform, as well as the increased operational expenses associated with scaling up production and meeting the high demand for the new platform.

The Road to Recovery

Despite the short-term challenges, BofA is optimistic about NVIDIA's long-term prospects. The bank forecasts a recovery in the second half of the year, driven by several factors. First, the strong demand for the Blackwell platform is expected to continue, as more companies adopt the technology for their AI and accelerated computing needs. Second, NVIDIA's strategic initiatives, such as expanding its product offerings and partnerships, are expected to drive growth and offset any short-term financial challenges. Finally, the company's focus on innovation and product development is expected to keep it ahead of the competition and capitalize on the growing demand for AI and accelerated computing technologies.



Expert Endorsements

Industry leaders have praised the Blackwell platform for its potential to drive innovation and growth. For example, Sundar Pichai, CEO of Alphabet and Google, stated, "We are fortunate to have a longstanding partnership with NVIDIA, and look forward to bringing the breakthrough capabilities of the Blackwell GPU to our Cloud customers and teams across Google, including Google DeepMind, to accelerate future discoveries." Similarly, Andy Jassy, president and CEO of Amazon, highlighted the deep collaboration between AWS and NVIDIA, stating, "It's why the new NVIDIA Blackwell GPU will run so well on AWS and the reason that NVIDIA chose AWS to co-develop Project Ceiba, combining NVIDIA’s next-generation Grace Blackwell Superchips with the AWS Nitro System's advanced virtualization and ultra-fast Elastic Fabric Adapter networking, for NVIDIA's own AI research and development."

Conclusion

In conclusion, while NVIDIA's Blackwell shift is taking a toll on the company's margins in the short term, the long-term prospects remain bright. The strong demand for the platform, strategic initiatives, and expert endorsements all point to a recovery in the second half of the year. Investors should keep an eye on NVIDIA's progress and consider the potential for long-term growth in the AI and accelerated computing sectors.