Nvidia tumbles after lockdowns, Ukraine war hurt forecast
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NVIDIA, the largest US chipmaker by market value, slid in late trading after China’s Covid-19 lockdowns and the war in Ukraine weighed on its sales forecast.
Revenue in the current quarter will be roughly US$8.1 billion, the company said in a statement on Wednesday (May 25). That compares with an US$8.44 billion average analyst estimate, data compiled by Bloomberg showed.
The outlook reflects the continuing supply-chain chaos in China, where Covid-19 lockdowns have disrupted production and transportation lines. That’s made it harder for companies like Nvidia to capitalise on still-growing demand for chips.
Nvidia also cited Russia, which invaded Ukraine and drew widespread sanctions earlier this year, for hurting its outlook. Together, the problems will cut sales by about US$500 million this quarter, Nvidia said.
“The supply chain has been problematic,” chief executive officer Jensen Huang said on a conference call with analysts. “We’re doing our best.”
The shares fell as much as 10 per cent to US$152.20 in extended trading. Nvidia’s stock had gained 5.1 per cent before the close on Wednesday, but remained down 42 per cent for the year — the victim of a broader rout afflicting the chip market.
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Investors have grown concerned that a surge in semiconductor demand during the pandemic years will fade, setting up one of the industry’s hallmark boom-and-bust cycles. But Nvidia’s growth in its fiscal first quarter suggests that demand remains strong.
Revenue gained 46 per cent to US$8.29 billion, topping the US$8.1 billion average analyst estimate. Excluding certain items, profit was US$1.36 a share, compared with an average estimate of US$1.30.
Revenue from data-centre chips grew 83 per cent to US$3.75 billion, also above projections. Cloud providers are increasingly relying on Nvidia’s processors to handle artificial intelligence. That has helped Huang transform the company from a niche graphics-card manufacturer to a chipmaking powerhouse.
“We expect to see data-centre demand remain strong,” he said on the call.
Gaming revenue climbed 31 per cent to US$3.62 billion last quarter, while so-called professional visualisation sales rose 67 per cent to US$622 million. A weak spot was automotive revenue, which declined 10 per cent.
Nvidia’s gross margin, the percentage of sales remaining after deducting costs of production, will be roughly 66 per cent this quarter — in line with the previous 3 months.
Nvidia’s tepid outlook overshadowed its strong results — and it follows similarly downbeat forecasts from other major tech providers. Companies such as Cisco Systems and Applied Materials have cut guidance because of the situation in China.
Nvidia chief financial officer Colette Kress said that China lockdowns also have softened demand locally. “You have very large cities that are in full lockdown,” she said. “So it’s impacting our demand.”
Russia, meanwhile, has historically represented about 2 per cent of Nvidia’s revenue. And it has been an even bigger piece of the company’s gaming business, Huang said. Nvidia halted sales to the country earlier this year following the Ukraine invasion.
The full impact of the situation and China in Ukraine, Huang said, is “difficult to predict”. BLOOMBERG
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