The chip manufacturer recently released its sales forecast, signaling that it’s game chip inventory is finally easing.
What does Nvidia data suggest?
According to Nvidia Corp., the current period highlights that the gaming computer makers have started ordering graphics chips again. The manufacturers had troubles because of inventory buildup earlier but now seem to have gotten rid of the problem.
The company also suggested on Thursday that their revenue for the current quarter could be $2.55 billion, plus or minus 2%. The company’s estimates match up to the average analyst estimates of $2.53 billion in revenues this quarter. The Santa Clara, California based company experienced a 7.4% jump in stock prices in extended trading soon after the news came out. However, the rally couldn’t keep up for long.
The Chief Financial Officer of the Nvidia, Colette Kress spoke during a conference call that the server market outlook for the company had worsened this quarter. The market is so hard to predict right now that the company did not update its annual forecast.
This is because Huang said that its large customers, called hyperscale, have paused their spending. However, he is optimistic that they will start investing soon. In a recent interview, he said,
“The hyperscalers built too much capacity last year. The amount of computation that the world needs is going to go up. The fundamentals of our data-center business are fantastic.”
Nvidia running after growth
The company’s CEO Jensen Huang is trying hard to turn the fortunes of Nvidia around. The chip manufacturer experienced great growth in the last five years, and its revenue has doubled. The consecutive revenue gains began in 2014, ending in Q4. The demand for graphics chips went considerably high because of cryptocurrency miners. At a time, the chips were selling for as high as 3x their markup price and the company’s core customer base i.e. gamers were starved for the cards.
However, as soon as the digital coin market plunged, the demand for the graphics chips also dwindled. The excess inventory pent up the orders book for Nvidia, slowing down new orders.
To continue on the same growth path, Huang needs to deliver on the core business- graphics chips used in making gaming PCs. Its inventory stockpile has brought some slowdown in this business, holding back new orders.
Nvidia is also banking on data centers where its chips are playing a crucial role in enabling artificial intelligence-based computing. Huang is now looking for big tech companies like Amazon’s AWS cloud and Alphabet Inc.’s Google to expand its infrastructure spending, which could pave a new road for the company’s finances.
The net income for the company on the quarter ending April 28 was $394 million. It is a significant decrease from last year when it reported $1.24 billion net income. Sales also declined 31% year-over-year to $2.2 billion. Analysts have estimated a profit of 56 cents per share on a $2.2 billion sales figure. Total revenue for this quarter increased by 1% than the previous quarter.