over 1 year ago • 2 mins
Nvidia reported a mixed bag of third-quarter earnings on Wednesday, but a promising forecast suggests the firm's chipping away at its obstacles.
What does this mean?
Nvidia’s gaming chips were selling like hotcakes when locked-down entertainment seekers flocked to their console screens. But now that the real world’s open for business again, sales of those once-prized chips have dropped over 50% from this time last year. Add in tight export restrictions to China and the country’s own sluggish gaming and cloud computing markets, and Nvidia ended up with overall third-quarter sales that wallowed around 15% below the same period last year. But keep your chin up: Nvidia believes the worst of the gaming slump is behind it, and predicted that this quarter’s total sales and profit will take a turn for the better.
Why should I care?
For markets: Canary in the cloud.
Shrewd investors use Nvidia’s data center segment to check the pulse of the cloud industry. And with good reason: while Nvidia makes chips for tons of industries, the cloud industry is one particularly lucrative treasure chest. The vitals seemed strong last quarter, with the segment growing 30% from the same time last year – and Nvidia predicted more of that down the line too. So either Nvidia’s big cloud-provider customers like Amazon and Microsoft are seeing strong demand, or they’re unwisely stocking up during a slowdown.
The bigger picture: Crack the whip.
Lockdowns didn’t just turn us into bakers and gamers: they also caused a raft of supply snags, including chip shortages across many industries. That saw impatient chip buyers making mammoth, often inflated orders in a bid to jump the queue, leaving swamped manufacturers working overtime to fulfill them. But now demand has slowed, and chipmakers have found themselves with piles of unwanted goods on their hands – a classic case of the bullwhip effect. The solution: slash prices, or take the loss on the unsold stash like Nvidia did last quarter.
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