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NVIDIA Stock Plummets 14% After Warning of $500 Million Revenue Shortfall

Jan 28, 2019 12:27 EST

Today NVIDIA (NASDAQ:NVDA) released a warning that fourth quarter fiscal year 2019 (last quarter) revenue was down $500 million versus guidance previously given by the firm. Shares of the company fell off a cliff and are currently around 14 percent down on the day, good for NVIDIA's worst day on the stock market in almost a decade.

  • Fourth quarter revenue expected to be $2.20 billion versus previous guidance of $2.70 billion
  • Gaming and Datacenter revenue below the company’s expectations
  • Will discuss reported financial results on Feb. 14 earnings call

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

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In addition, sales of certain high-end GPUs using NVIDIA’s new Turing™ architecture were lower than expected.

-NVIDIA Press Release 1/29/19

Turing isn't selling as well as NVIDIA hoped it would.

So there we have it directly from the horse's mouth. The 2000 line of RTX Geforce cards aren't gaining sufficient market traction and their less-than-great reception is probably why NVIDIA pivoted to announcing the 11xx line of non-raytracing graphics cards just a few weeks ago.

NVIDIA: Slow Datacenter Growth and China's trade war affecting business

This goes to show that NVIDIA, despite all the headway they've made into data-centers and big data applications, is still very much dependent on its core business - PC gaming. It was optimism around these emerging markets, combined with NVIDIA's dominant lead over rival AMD in PC gaming, that fueled its massive stock gains in 2016 and 2017.

“Q4 was an extraordinary, unusually turbulent, and disappointing quarter,” said Jensen Huang, CEO. “Looking forward, we are confident in our strategies and growth drivers."

It's no surprise then that investors got spooked today as NVIDIA also touched on slower-than-hoped for data center growth:

In Datacenter, revenue also came in short of expectations. A number of 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

It sounds like some key customers deferred procurement last quarter of some large purchases of GPU-compute products such as NVIDIA's Tesla cards and DGX systems. These contracts could easily be worth tens of millions of dollars so a "number of deals" could quickly add up here.

This is eerily similar to the announcement Apple made not even a month ago. Apple cited macroeconomic factors, namely the US-China war of tariffs as well as weak consumer demand for its products.

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The trade war being waged between the U.S. and China has affected many technology companies and now it seems NVIDIA is counting itself among the casualties.

Deteriorating macroeconomic conditions, particularly in China, impacted consumer demand for NVIDIA gaming GPUs.

-NVIDIA Press Release 1/29/19

It seems the tariffs on imports into China has finally affected Chinese consumer demand for its gaming products, too. The company remained upbeat in its post, reaffirming the fact that it is still the leader in consumer and professional graphics and that it believes these issues are all "near-term headwinds".

Long term investors probably have nothing to worry about as gaming, design, HPC, AI, and autonomous vehicles all look to continue to grow, and all of which NVIDIA either dominates or is positioned well to grow in.

The news had a chilling effect on some other well-known semiconductor companies. Intel (NASDAQ:INTC) is trading down around 2 percent and AMD (NASDAQ:AMD) is down over 6 percent as of this writing.