Monolithic Power faces investigation after Nvidia canceled 50% of orders

A law firm investigation into Monolithic Power Systems has exposed the fallout from Nvidia's decision to cancel half its orders with the chip supplier, raising questions about what executives knew and when.

Kahn Swick & Foti, a securities litigation firm led by former Louisiana Attorney General Charles C. Foti Jr., announced July 24 that it has commenced an investigation into whether Monolithic Power Systems Inc.'s officers and directors breached their fiduciary duties to shareholders. The probe follows a November 2024 report from Edgewater Research revealing that Nvidia, Monolithic's largest customer, had canceled 50% of its outstanding orders and planned to eliminate the company's allocation to most variants of its next-generation Blackwell chips.

"Nvidia engineers lost confidence in the company's products and decided to turn to its competitors as primary suppliers," Edgewater Research analysts wrote in the Nov. 11 report, according to the law firm's announcement. The cancellation stemmed from what the report described as "performance issues" with Monolithic's power management solutions.

Monolithic Power, a fabless semiconductor company specializing in power management chips, had been a key supplier to Nvidia's data center GPU lineup. The loss of orders from Nvidia — which accounted for a significant portion of Monolithic's revenue — represents a material shift in the competitive landscape for power management integrated circuits (PMICs) used in AI accelerators. Competitors including Texas Instruments, Infineon Technologies and Renesas Electronics stand to capture the displaced allocation.

A securities class action lawsuit has already been filed against Monolithic and certain executives, charging them with failing to disclose material information during the class period in violation of federal securities laws. That litigation remains ongoing. KSF's investigation is examining whether the company's leadership breached fiduciary duties under state or federal law.

The Nvidia relationship unravels

The Edgewater report, published more than 18 months before the investigation was announced, detailed a rapid deterioration in the Nvidia-Monolithic relationship. Beyond canceling half of its outstanding purchase orders, Nvidia intended to remove Monolithic Power's allocation from most variants of its Blackwell architecture — the GPU platform that powers Nvidia's highest-performance AI training and inference systems.

For Monolithic, the loss of its marquee customer creates a revenue gap that will be difficult to fill. Power management chips are highly customized for each customer's specifications, and replacing Nvidia-scale orders requires design wins with other hyperscale customers — a process that typically takes 12 to 18 months from qualification to volume production.

Investor implications

Monolithic Power shares trade on the Nasdaq under the ticker MPWR. The company has not publicly commented on the investigation or the Edgewater report's findings. With a securities class action underway and a fiduciary-duty investigation now launched, the company faces mounting legal costs and potential reputational damage that could further pressure its stock.

For investors, the key question is whether Monolithic can diversify its customer base before the Nvidia revenue hole widens. The company's concentration risk — reliance on a single customer for a substantial portion of revenue — is now the central issue. Competitors with broader customer bases and more diversified product lines are better positioned to absorb any shifts in Nvidia's procurement strategy.

This article is for informational purposes only and does not constitute investment advice.