Weak demand caused by inflation and supply chain crisis are affecting the world's largest chip companies by market value. On Wednesday, GPU giant NVIDIA announced its first quarter results and warned that macroeconomic factors could lead to a sharp slowdown in the company's games and other businesses. After the announcement of the financial report, NVIDIA's after hours share price fell by nearly 7%. Since this year, the company's share price has fallen by more than 42%.
The financial report shows that in the first quarter of this year, NVIDIA's revenue was US $8.29 billion, a year-on-year increase of 46%; Earnings per share were $1.36, higher than analysts' expectations. However, NVIDIA expects revenue to fall to $8.1 billion in the second quarter, less than analysts expected.
Huang Renxun, founder and CEO of NVIDIA, attributed the reduction in revenue expectations to the "challenging macro environment" faced by the company. NVIDIA said that due to the conflict between Russia and Ukraine and the epidemic in China, the company's revenue in the current quarter may be reduced by $500 million.
In the past quarter, NVIDIA GPU demand remained strong, and these chips were mainly used in data centers and games. In the first quarter, NVIDIA's data center business increased by 83% year-on-year to US $3.75 billion, surpassing the game business. The game business increased by 31% year-on-year to US $3.62 billion. NVIDIA warned that it expects game revenue to decline by more than 10% this quarter.
In the last quarter, NVIDIA said it saw the "abnormal" demand for chips, especially from artificial intelligence and data centers, and expected the company's product supply to increase "significantly" in the second half of 2022. In the latest quarterly earnings release, NVIDIA reiterated that the supply restrictions of chips are easing.
NVIDIA's game chips are mainly driven by sales of laptops and game consoles, such as Nintendo's game console switch. However, with the high global inflation, consumers' demand for devices such as laptops and game consoles began to decline, which was the main factor leading NVIDIA to reduce the sales prospect of its game business.
"Overall, the game business is slowing down." "Based on the weak market demand, NVIDIA chose to reduce sales in some markets," Huang Renxun said He also mentioned the Chinese market. Colette Kress, chief financial officer of NVIDIA, said that the Chinese epidemic had an impact on supply chain logistics and consumer spending.
NVIDIA's latest expectations about the game market are diametrically opposed to Huang Renxun's statement when he released his financial report last quarter. Huang Renxun said in February this year: "video games are the largest game type in the world. The sales of steam platform has increased by more than 50% in the past two years, and the number of players has increased significantly."
Gartner analyst Sheng Linghai analyzed to the first financial reporter: "in the past, some people bought game chips to mine, but since last year, NVIDIA has limited game chips for mining purposes and specially launched mining chips, which is also an important reason for the decline of game business."
However, the sharp drop in the price of virtual currency also affected NVIDIA's revenue of mining dedicated chips in the latest quarter. In the first quarter, the decline in the company's revenue from CMP, a special product for cryptocurrency, led to a 52% decline in the revenue of "other" business categories.
In addition, NVIDIA also slowed recruitment in order to control expenses. In the past quarter, the company's operating expenses increased by 35% year-on-year to $1.6 billion.