Chip designer Nvidia Corp forecasted a drop in video game chip sales in the current quarter and surprised some analysts by pointing out additional supply-chain difficulties arising from China’s COVID-19 restrictions.
Nvidia’s chief executive told Reuters that in the current quarter, the company’s gaming business revenue will be down. Huang said, “Overall, the gaming market is slowing. Nvidia has chosen to restrict what it supplies to the China market due to lower market demand.” According to him, Nvidia is also hurting from Russia, with slower sell-through in Europe.
Despite the fact that the company’s first-quarter revenues and profitability surpassed analyst expectations, Nvidia shares slumped 6.7 per cent in extended trade. Nvidia’s stock has lost roughly 40 per cent of its value this year, in line with a broader sell-off in growth stocks due to fears about the Federal Reserve’s rapid interest rate hikes.
As consumers evaluate expenditures such as computers and video game consoles, concerns about inflation are spreading throughout the U.S. economy.
Nvidia expects revenue of $8.10 billion in the second quarter, plus or minus two per cent. According to Refinitiv’s IBES statistics, analysts projected $8.45 billion on average. The decreased revenue prediction included a $500 million reduction in revenue related to Russia and China’s COVID lockdowns. The $500 million amount included around $400 million in lost gaming sales in China and Russia, as well as another $100 million in missed data centre sales in Russia, according to chief financial officer Colette Kress.
On the results call, Kress told analysts that China’s COVID restrictions were harming consumer spending as well as logistics. According to the experts, decreased graphics processor prices and less discretionary spending due to high inflation will put a strain on Nvidia’s gaming industry.
Kress said that the cryptocurrency market’s downturn harmed demand for graphics processing units, which are preferred by cryptocurrency miners. Nvidia’s OEM and other revenue categories fell by 52 per cent year over year due to a dip in revenue from cryptocurrency mining processors.
Nonetheless, as more companies move to the cloud and incorporate artificial intelligence into their operations, demand from data centre clients has remained high. According to Kress, this, together with automobile sales, will help balance the fall in gaming. Revenue from data centres reached a new high of $3.75 billion in the first quarter, increasing 83 per cent year over year. Gaming revenue reached a new high of $3.62 billion in the first quarter, increasing 31 per cent year over year.
Revenue for the first quarter ending 1 May increased by 46 per cent to $8.29 billion, a new high. Excluding expenses, the business earned $1.36 per share, exceeding analysts’ expectations of $1.29 per share.