Nvidia stock drops as China COVID shutdowns weaken outlook

The shares of Nvidia Corp. fell in the extended session on Wednesday after COVID closures in China and the war in Ukraine reduced $ 500 million in chip maker’s outlook for the current quarter, while the company reported record results.

Nvidia NVDA,
+ 5.08%
shares fell more than 7% after hours, after a 5.1% increase in the regular session to close at $ 169.75.

For the second or current fiscal quarter, Nvidia expects revenue of $ 7.94 billion to $ 8.62 billion, while analysts surveyed by FactSet forecast revenue of $ 8.4 billion on average. “This includes an estimated reduction of about $ 500 million in relation to Russia and the COVID blockades in China,” Nvidia said in a statement.

It is similar to Cisco Systems Inc. CSCO,
+ 0.53%,
which reported its earnings last week and has a final quarter of April as Nvidia. Cisco noted that it was set aside after Chinese authorities shut down Shanghai from March 27, which threw a wrench at its ability to obtain components. As a result, Cisco issued a bad outlook and stocks saw their worst day in more than a decade.

“We estimate that the impact of lower sales in Russia and China will affect our second-quarter game sales by $ 400 million,” Colette Kress, Nvidia’s chief financial officer, said in a call with analysts. “In addition, we estimate that the absence of sales in Russia will have an impact of $ 100 million in the second quarter of the data center.”

Meanwhile, first-quarter Nvidia data center sales rose 83% to a record $ 3.75 billion from $ 2.25 billion in last year, while analysts had expected $ 3.6 billion. dollars.

Game sales rose 31% to a record $ 3.62 billion from $ 2.76 billion, while analysts surveyed by FactSet expected Nvidia’s game sales of $ 3.46 billion. However, gaming revenue is expected to decline during the current quarter, further weakening Nvidia’s outlook.

“As we expect a continued impact, as we prepare for a new architectural transition by the end of the year, we are projecting that gaming revenue will decline sequentially in the second quarter,” Kress said. “Channel inventory is almost normalized and we expect it to stay around those levels in the second quarter.”

“The data center has become our largest market and we see a continued momentum in the future,” he added. “Customers continue to have limited supply in their infrastructure needs and continue to add capacity as they try to keep pace with demand.

Nvidia reported first-quarter net income of $ 1.6 trillion, or 64 cents a share, compared to $ 1.19 billion, or 76 cents a share, last year. Adjusted earnings, which exclude share-based compensation items and other items, were $ 1.36 per share, compared to 91 cents per share in the past year period. All figures are adjusted for last year’s 4 per 1 stock split.

Revenue rose to a record $ 8.29 billion from $ 5.66 billion in the quarter a year ago.

Analysts had forecast $ 1.30 for revenue of $ 8.12 billion, according to Nvidia’s forecast of $ 7.94 billion to $ 8.62 billion.

Reads: The end of the wonders of a chip: why the ratings of Nvidia, Intel and AMD have experienced a massive upheaval

“We have achieved record results in data centers and gaming in the context of a challenging macro environment,” Nvidia CEO Jensen Huang said in a statement. “We are preparing for the biggest wave of new products in our history with new GPU, CPU, DPU and robotics processors expanding into the second half. Our new chips and systems will greatly advance AI, graphics , the Omniverse, autonomous cars and robotics, as well as the many industries that affect these technologies. “

Reads: Why semiconductor stocks are “almost non-reversible” despite record gains amid global shortages

Nvidia’s results follow those of leading chip makers such as Advanced Micro Devices Inc. AMD,
+ 1.63%,
Intel Corp. INTC,
+ 1.27%
and Qualcomm Inc. QCOM,
+ 2.10%,
while Broadcom Ltd. AVGO,
+ 1.42%
is scheduled to be reported on June 2nd.

Over the past 12 months, shares of Nvidia have risen 8%, while at the same time almost a 50% discount on its record high closing of $ 333.76 set on November 29th. In comparison, the PHLX Semiconductor SOX Index,
+ 1.98%
the S&P 500 SPX has fallen 8% in the last 12 months,
+ 0.95%
down 5%, and the Nasdaq Composite Index COMP,
+ 1.51%
has 16%.

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