Nvidia Corp (NVDA.O), a company that creates graphics chips, forecasted on Wednesday a steep decline in sales in the current quarter due to a weakened gaming market, sending its shares down around 5% in after-hours trade.
The firm predicted third quarter sales of $5.90 billion, down 17% on the prior year, but added that growth in the data center and automotive industries would somewhat offset the decreases. Analysts expressed fear, meanwhile, that it would get more unfavorable news as erstwhile growth sectors decrease.
“We think Nvidia may see further downside from the crypto-mining and data center end markets,” said Kinngai Chan, Summit Insights Group analyst.
Sales of Nvidia graphics chips, or GPUs, which are used for cryptocurrency mining have declined as a result of the collapse of the cryptocurrency market.
The expansion of data centers, which has boosted chip sales, has analysts worried.
On an earnings call, Nvidia Chief Executive Jensen Huang stated that although infrastructure investment by Chinese cloud service providers had significantly decreased in the second quarter, this had been more than offset by robust growth in the United States.
The business’s $6.70 billion second-quarter revenue was much less than the $8.10 billion Nvidia predicted in May.
Its gaming segment reported $2.04 billion in sales, a 33% decrease from the previous year. Revenue from data centers maintained steady at $3.81 billion, up 61% over the previous year.
Due to decades-high inflation, customers are holding off on discretionary expenditures like video game equipment, which is causing the gaming sector to exhibit indications of fragility.
In the second quarter, Nvidia reported taking a $1.34 billion loss to write down inventory that had been accumulated when the company believed the gaming and data center sectors would be far more robust.
Huang told analysts on the call that the company also faced supply chain challenges that prevented it from selling more systems to data centers.
“We’re seeing a great deal of demand for GPUs in the cloud,” Huang said on the call. “We were challenged this quarter with a fair amount of supply chain challenges.”
