Shulou(Shulou.com)06/02 Report--

Big Data Digest

Authors: Jiang Baoshang, Wei Zimin

Nvidia lowered its revenue forecast for the fourth quarter on Jan.28, citing "deteriorating macroeconomic conditions, especially in China," the Wall Street Journal reported, lowering its previous forecast of $2.7 billion to $2.2 billion.

The stock market reacted strongly to this statement, with Nvidia's share price plunging 17% at one point. By midday, shares had partially recovered before closing down 13.82 percent. It currently has a market capitalization of $84.1 billion.

Not only Weida, other chip stocks were also affected by the announcement. On the same day, PHLX chip index fell 2%, AMD fell 8%, Mellanox Technolgies fell more than 3%.

Downgrades in expected earnings lead to stock declines

Before the third quarter earnings report was released, the market expected Nvidia to reach $3.24 billion in revenue, but the third quarter earnings report showed that Nvidia's actual revenue was only $3.18 billion. It was obvious that Nvidia's growth rate had slowed significantly at that time, and the chip business was obviously weak.

Nvidia, which will report its final fourth-quarter earnings on Feb. 14, now expects quarterly revenue of $2.2 billion, down from $2.7 billion previously reported. Quarterly margins were affected by charges related to "current market conditions," according to the release.

In the statement, Nvidia specifically pointed out that after the cryptocurrency boom, Nvidia's performance experienced a continuous decline due to excess mid-range chip inventory. The reduction in inventory and its impact on the business was largely in line with management expectations. In addition, especially in China, the deteriorating macroeconomic environment has affected consumer demand for NVIDIA gaming GPUs. In addition, sales of some high-end GPUs built on Turing architecture were also lower than expected.

GeForce RTX demand lower than expected

Overall, sales of games and data center platforms, its main businesses, were lower than expected.

Nvidia founder and ceo jen hsun huang also expressed disappointment: "the fourth quarter was an extraordinary, volatile and disappointing quarter. "

However, Huang is confident about the future and Nvidia's strategy and growth momentum.

Huang said: "Our business foundation is stronger and more obvious than ever before, NVIDIA pioneered accelerated computing models to meet the growing demand for computing resources, and we have been refining and optimizing market strategies in the fields of gaming, design, high performance computing, artificial intelligence and autonomous vehicles." These markets are already very important and will be very large.

Bet on weak growth in gaming business

At CES 2019 International Consumer Electronics Show on January 7, NVIDIA held a press conference, which was not only the first of the entire Consumer Electronics Show, but also the first press conference of NVIDIA's opening year.

Huang set the theme of the conference at the beginning: only talk about gaming. There is no mention of the situation and intention of "everyone mining" in 2018. Its new card RTX 2060 and 17 laptops with new cards seem to be indicating that Nvidia's betting game business in 2019.

However, according to Nvidia's earnings report, in the third quarter, Nvidia's game revenue was 1.764 billion yuan, up 13% year-on-year. Although there was double-digit growth, it was indeed a "significant decline" compared to the previous six quarters, after all, there were four quarters where game revenue increased by about 50% or more. Only two quarters were below 30%, but both were above 25%.

Data source: company financial report, opinion research

The gaming business accounts for more than 50% of Nvidia's revenue, and Nvidia's gaming business has experienced sluggish growth, but it is not easy to improve this situation or even solve this problem.

Based on feedback from gamers, Nvidia was very much expected before the launch of the 20 series GPU. But the game market has not yet had games that can play the full performance of the new graphics card, and it seems that the development of the game market has not kept pace with the pace of Nvidia chip launch.

In addition, Nvidia graphics card has a tradition of BUG, for example, before foreign media exposed that the domestic so-called "ultimate nuclear bomb"Nvidia Titan V graphics card now appears a computing BUG, engineers after testing found that two models have a 10% chance of digital errors.

Obviously, this will lead to a very poor user experience, so the game graphics card sales growth is weak. Especially under the limitation of 2018 edition number and relevant qualifications, the whole Chinese game industry, whether mobile games, PC games or page games, can be said to be greatly affected. The industry has been rumored that since the game winter.

Overall, the dual blow of demand and supply has made NVIDIA's gaming business weak.

In addition to gaming, data center revenue also failed to meet expectations. Some of the deals in the company's forecast did not close in the final month of the quarter as customers shifted to a more cautious approach. And, with the cryptocurrency boom and subsequent bankruptcy, Nvidia previously expected to sell mid-range graphics chips with excess inventory. But Nvidia says it has a large and expanding market opportunity in artificial intelligence and high-performance computing and remains competitive.

Goldman Sachs 'latest report: Nvidia isn't the only one

Nvidia isn't the first tech company to lower its revenue forecast due to macroeconomic factors. Earlier this month, Apple lowered its revenue forecast for the quarter. Apple will report its earnings after hours on January 29 local time.

David Kostin, a US securities strategist at Goldman Sachs, released a research report last Friday (January 25), claiming that companies with high international revenues, especially those with large Chinese businesses, may not be able to report well. Goldman Sachs also has an advance list of investors to be wary of, in addition to Nvidia, Broadcom, Micron Technology, Qualcomm, Qorvo, Skyworks Solutions and Wynn Resort, all of which generate more than half of their revenue from Greater China.

A quarter of S & P 500 companies will report earnings this week, including Apple, Tesla, Google, Amazon and other tech giants. This quarter's earnings come at a critical stage in Sino-US trade talks, with Wall Street generally pessimistic about February's market performance and expecting stocks to fluctuate wildly during the earnings season. Some technical strategists predict the S & P 500 could fall as much as 5% to around 2500 points during the earnings season.

Related reports:

https://www.wsj.com/articles/nvidia-lowers-guidance-on-weakness-in-gaming-datacenter-businesses-11548690812

https://baijiahao.baidu.com/s? id=1623956552189482956&wfr=spider&for=pc

https://tech.sina.com.cn/csj/2019-01-29/doc-ihrfqzka1942321.shtml

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