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Monolithic Power Systems (MPWR, Financials) shares dropped by double digits in premarket trading Monday following a report from Edgewater Research indicating potential risks to the company's allocation in Nvidia's (NVDA, Financials) Blackwell GPU line.
Edgewater analysts said that Monolithic's allocation in Blackwell might be drastically limited or eliminated by performance problems with its voltage regulator modules and power management integrated circuits. Given both businesses got recent rush orders, Japanese semiconductor company Renesas and Germany's Infineon Technologies may absorb Monolithic's share; Renesas reportedly took up the B200 allocation and Infineon possibly managing the GB200.
Though it might result from a product failure in Blackwell's setups, where power usage topped 700 watts, Edgewater experts indicated the source of Monolithic's power management IC problem is "unclear." Though Monolithic may maintain shipments for B300A (700 watts), this performance issue leaves Monolithic with "limited or no" allocations for B200 (1,000 watts) and GB200 (1,200 watts).
The analysts also said that while Nvidia is probably looking at Monolithic's confirmed orders for next quarters, it has already canceled about half of Monolithic's backlog, therefore affecting all unverified orders. By early 2025, they stated Nvidia may raise Renesas's part of the Hopper GPU allocation to 50% from around 15% in the fourth quarter of 2024. Infineon hasn't yet qualified as a Hopper supplier however.
Edgewater claims that while Monolithic's latest solutions are just short patches rather than long-term solutions, Nvidia's engineering staff has apparently turned trust toward Renesas and Infineon as main suppliers.
We view this as creating a substantial downside risk for MPWR's Enterprise Data segment in 2025, the analysts concluded, stressing issues over the possible effect on Monolithic's shares, especially amid investor attention on the company's AI-related performance.
This article first appeared on GuruFocus.