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Nvidia Faces Setbacks as Major Customers Delay Orders of Latest AI Racks Due to Overheating Issues

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Nvidia is encountering challenges with its new ‘Blackwell’ AI racks, with major customers delaying their orders due to overheating issues, as reported by The Information on Monday. Shares of the Santa Clara-based company dropped more than 4% following the news.

The overheating problems reportedly affect the initial shipments of the racks, which house Nvidia’s chips in data centers. The glitches include issues with how the chips are connecting to each other. This problem has led major customers such as Microsoft, Amazon’s cloud division, Alphabet’s Google, and Meta Platforms to reduce their orders for the new racks.

Delayed Orders and Shift to Older Models

The affected customers, often referred to as hyperscalers, had placed substantial orders for the Blackwell racks, with each company initially committing $10 billion or more. Some are opting to delay their orders until a later version of the racks is available, while others are returning to older AI chip models.

Microsoft, for instance, had planned to deploy at least 50,000 Blackwell chips in a Phoenix facility, but due to the delays, OpenAI, one of its key partners, requested that Microsoft provide older ‘Hopper’ chips instead.

Despite these delays, it remains unclear how much this will impact Nvidia’s overall sales, as the company may still find other buyers for the affected racks. In November, Nvidia’s CEO Jensen Huang had expressed confidence that the company would exceed its target of generating billions of dollars in revenue from Blackwell chips during its fourth fiscal quarter.

Nvidia and Amazon declined to comment, while Microsoft, Google, and Meta did not immediately respond to Reuters’ inquiries.

 

Macquarie to Invest Up to $5 Billion in Applied Digital’s AI Data Centers

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Australia’s Macquarie Group has committed to investing up to $5 billion in Applied Digital’s high-performance computing business, acquiring a 15% stake in the company amid surging demand for artificial intelligence (AI) infrastructure. The announcement, made on Tuesday, sent Applied Digital’s shares soaring by 20% in pre-market trading.

Macquarie’s asset management division has initially pledged $900 million to develop a state-of-the-art data center campus in North Dakota. Additionally, Applied Digital retains the right of first refusal to access an additional $4.1 billion in investments for future data center projects over the next 30 months.

Wes Cummins, CEO of Dallas-based Applied Digital, emphasized that the investment ensures sufficient equity to construct cutting-edge data centers capable of handling the high-power demands of AI applications. The company will use the funds to repay debt incurred during the development of its North Dakota facilities and recover over $300 million of its equity investment in the project.

The move comes amid a broader boom in AI-driven investments, spurred by the rapid growth of generative AI models such as ChatGPT. Computing infrastructure providers like Applied Digital have witnessed substantial interest from businesses seeking to develop their own AI models and gain a competitive edge.

In line with this trend, Microsoft recently announced plans to allocate $80 billion in fiscal 2025 to AI data centers, reflecting the growing computational needs of the industry.

Applied Digital has seen its shares triple over the past two years as investors bet on robust growth in AI and data center infrastructure. The company is scheduled to report its second-quarter earnings later on Tuesday.

 

Microsoft Halts Hiring in U.S. Consulting Unit Amid Cost-Cutting Efforts

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Microsoft has decided to pause hiring within its U.S. consulting unit as part of a broader effort to reduce costs, according to a report by CNBC on Tuesday. The move is intended to help the tech giant manage its expenses while continuing to prioritize investments in artificial intelligence (AI).

Earlier this month, Microsoft announced plans to invest $80 billion in fiscal year 2025, primarily focused on developing data centers for training AI models and deploying AI and cloud-based applications. To support these efforts, Microsoft has implemented a series of cost-saving measures within its consulting division. This includes halting new hires and refraining from filling open roles. Derek Danois, a consulting executive at Microsoft, informed employees of the decision in an internal memo.

In addition to the hiring freeze, the memo emphasized strict cost management, instructing employees to refrain from expensing travel for internal meetings, encouraging the use of remote sessions instead. The consulting division, part of Microsoft’s broader Customer and Partner Solutions organization, is also reducing marketing and non-billable external resource spending by 35%.