Nvidia Corp. issued a warning on Monday that the slowdown in its gaming industry which will affect Nvidia stocks & would cause its second-quarter sales to decline by 19% from the preceding quarter, which caused the chip maker’s shares to fall by approximately 8%.
Just days after chipmakers Intel Corp, Qualcomm, and Sony Group (6758.T) predicted disappointing sales due to concerns about the demand for personal computers and phones, the business released preliminary results for the second quarter.
The video game sector, which was previously thought to be recession-proof, is starting to deteriorate as customers hesitate to buy discretionary items like video game consoles.
Sony cut its prediction as PlayStation maker Sony reported a decline in gaming income last month.
Due to the Russia-Ukraine war and COVID-19 limits in China’s manufacturing centres in recent months, chipmakers have also been battling with severe supply-chain bottlenecks ahead of the crucial Christmas season.
Preliminary revenue for Nvidia’s gaming division, which includes sales of premium graphics cards for desktops and laptops, fell by 44% to $2.04 billion from the prior quarter.
The size of the fall, rather than the warning about gaming income, according to Piper Sandler analyst Harsh Kumar, was unexpected.
Sandeep Deshpande, a J.P. Morgan analyst, wrote in a note that “Nvidia’s gaming slowdown presumably includes the chips they sell to the crypto sector which has been sluggish therefore the scale of the slowdown is so significant.”
In the second quarter of last year, Nvidia made more bitcoin mining chips available, generating $266 million in revenue.
On August 24, the company anticipates announcing overall second-quarter revenue of roughly $6.70 billion.
According to IBES statistics from Refinitiv, analysts predicted revenues of $8.1 billion, with $3.12 billion coming from gaming.
Nvidia stated that despite hitting a record, data centre revenue fell short of expectations owing to supply disruptions and that charges of $1.32 billion will be included in the quarter’s results as a result of excess inventory and promises made in anticipation of demand.
On Monday, shares of chipmakers plummeted as well, including rivals AMD and Qualcomm.