Nvidia delivery delays to weigh on Applied Digital's earnings

:Applied Digital lowered its full-year expectations on Tuesday, blaming a tight supply of sought-after networking components made by chipmaker Nvidia, sending shares of the data center service provider plunging nearly 23 per cent.

The company is grappling with delayed deliveries of some parts, including Nvidia's InfiniBand, which works like an ethernet cable, linking clusters of chips across servers.

InfiniBand enables AI computing. Demand for Nvidia's AI chips and accompanying tech has far outweighed supply as companies rush to adopt generative AI.

While Applied Digital did not flag any issues with AI chip supply on its earnings call, it said it has pushed back deliveries of Nvidia graphic processing units (GPUs) due to the InfiniBand bottlenecks.

"We could have taken a significant number of GPUs in December, but there's no reason to do that," the company said, adding it would be "detrimental" to take deliveries.

But Applied Digital said it has seen an improvement in deliveries of the networking equipment in recent weeks, a sign the issue could be easing.

The company now expects 2024 total revenue to come in below its prior range of $385 million to $405 million.

It also expects annual adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to be below its previous forecast range of $195 million to $205 million.

Applied Digital did not disclose its revised full-year projections for the metrics.

The company also missed estimates for second-quarter revenue. It reported revenue of $42.2 million for the quarter ended Nov. 30, which was below analysts' average estimate of $57.3 million, according to LSEG data.