Nvidia predicts a sharp decline in revenue in the second quarter

MOSCOW, 25 Aug – PRIME. Graphics chip developer Nvidia Corp has warned of a possible sharp drop in revenue in the current quarter amid weakening demand in the video game industry. After the close of the regular exchange session, the company’s shares fell by about 5%.

The company expects third-quarter revenue of €5.90 billion, down 17% from a year earlier, but this decline will be partly offset by growth in the data center and automotive business.

Analysts, though, fear it’s not all bad news from the company, as former growth areas slow down.

“We think that Nvidia may face further deterioration in demand in the end markets for data center equipment and cryptocurrency mining,” said Kinngai Chan, an analyst at Summit Insights Group.

Nvidia graphics chips (GPUs) are used to mine cryptocurrencies, and sales of these chips have worsened amid a downturn in this market.

Analysts also fear a slowdown in the data center segment, which has supported chip sales.

At a financial results conference, Nvidia CEO Jensen Huang noted that infrastructure investment by Chinese cloud providers slowed significantly in the second quarter, but that this factor was offset by strong growth in the US.

The company’s Q2 revenue was $6.70 billion, well below Nvidia’s May guidance of $8.10 billion.

Its video game segment revenue was $2.04 billion, down 33% from a year earlier. Data center segment revenue grew 61% year-over-year to $3.81 billion.

The video game industry is showing signs of weakness as consumers ditch purchases of non-essential items such as video game hardware amid inflation at its highest in decades.

Nvidia said it posted a $1.34 billion loss in the 2nd quarter from inventory write-downs built at a time when it thought the video game and data center markets would perform significantly stronger.

“I know demand is strong, but we expected it to be even stronger,” Huang told Reuters when commenting on the destocking of the data center segment.

In addition, at the conference, he told analysts that the company also faced supply issues that prevented it from selling more data center systems.

“We’re seeing significant demand for GPUs in the cloud,” he said at the conference. “But we’ve had quite a few supply chain issues this quarter.”