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NVIDIA Stock Plummets 14% after US $ 500 Million Revenue Shortfall



Today, NVIDIA (NASDAQ: NVDA) has issued a warning that fourth-quarter revenue for the fourth quarter of fiscal 2019 (Q4) fell $ 500 million compared to guidance previously given by the company. Shares of the company fell from a cliff and are currently around 14 percent on the day, good for the worst day of NVIDIA in the stock market in almost a decade.

  • Fourth-quarter revenue is expected to be $ 2.20 billion, versus the previous projection of $ 2.70 billion
  • Gaming and datacenter revenue below company expectations
  • Will discuss the financial results reported on February 14

Today's announcement had some very interesting lines and the company formally admitted that its line of "Turing" RTX graphics cards are performing poorly on the market, compared to expectations of a new generation of NVIDIA graphics cards.

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In addition, sales of certain next-generation GPUs using NVIDIA's new Turing ™ architecture were lower than expected.

-NVIDIA Press Release 1/29/19

Turing is not selling as well as NVIDIA expected.

So we have it directly from the horse's mouth. The Geforce RTX 2000 line of cards is not gaining enough traction on the market and its less-than-optimal reception is probably the reason why NVIDIA has started announcing the 11xx line of non-scratch graphics cards just weeks ago.

NVIDIA: Slow Data Center Growth and Trade War in China Affecting Business

This shows that NVIDIA, despite all the advances it has made in data centers and big data applications, still depends a lot on its core business – PC games. It was optimism surrounding these emerging markets combined with NVIDIA's dominant edge over rival PC games that fueled its massive stock gains in 2016 and 2017.

"The fourth quarter was extraordinary, extraordinarily turbulent and disappointing," said Jensen Huang, CEO. "Looking to the future, we are confident in our strategies and growth drivers."

It's no surprise, then, that investors were scared today, as NVIDIA also mentioned slower than expected growth for the data center:

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In the Datacenter, revenue also fell short of expectations. Several deals in the company's forecast did not close in the last month of the quarter, as customers shifted to a more cautious approach.

-NVIDIA Press Release 1/29/19

Some key customers appear to have delayed purchases in the last quarter of some major purchases of GPU computing products such as NVIDIA Tesla cards and DGX systems. These contracts could easily be worth tens of millions of dollars, so a "number of deals" could add up quickly here.

This is frighteningly similar to the announcement made by Apple less than a month ago. Apple cited macroeconomic factors such as the US-China tariff war and weak consumer demand for its products.

The trade war waged between the US and China has affected many technology companies and now it seems that NVIDIA is counting among the victims.

The deterioration of macroeconomic conditions, particularly in China, consumer demand impacted for NVIDIA gaming GPUs.

-NVIDIA Press Release 1/29/19

It seems that tariffs on imports in China have finally affected Chinese consumer demand for their gaming products as well. The company remained optimistic in its position, reaffirming the fact that it is still a leader in consumer and professional charts and believes that these issues are all "short-term opposing winds."

Long-term investors probably have nothing to worry about, because games, design, HPC, IA and standalone vehicles seem to continue to grow, and all of which NVIDIA dominates or is well positioned to grow.

The news had a scary effect on other well-known semiconductor companies. Intel (NASDAQ: INTC) is trading down around 2% and AMD (NASDAQ: AMD) has fallen more than 6% so far.



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