Nvidia is about to make a big announcement during a difficult time

Nvidia is about to make a big announcement during a difficult time

Nvidia Corp. faces a much more troubling environment. since the last time it launched a new chip architecture as it nears a new launch.

Nvidia NVDA,
+2.08%
is kicking off its fall GTC event on Monday, with CEO Jensen Huang scheduled to deliver a keynote address on Tuesday morning at 11 a.m. Eastern. At the same event in May 2020, Huang unveiled a new chip architecture in Ampere, and the analyst expects to use this year’s event to unveil the company’s next-generation chip architecture called “Lovelace.” after the 19th century English mathematician Ada Lovelace. , generally considered to be the world’s first computer programmer for her work on Charles Babbage’s theoretical Analytical Engine.

Ahead of the event, however, Nvidia has landed in a tough spot, with pandemic-era demand eroding its half-price so far this year. The company recently took an inventory charge of $1.22 billion as it tries to clear out old inventory before launch.

Read: Nvidia’s sales forecast falls about $1 billion short of expectations, the stock falls

Ampere was exposed about two months into the COVID-19 pandemic amid strong demand for gaming cards that sent the stock to a 122% gain in 2020, compared to a 51% gain on the PHLX SOX Semiconductor Index,
+0.53%.
Now, Nvidia is launching into an environment where gaming demand is falling during a consumer tech downturn, and the stock has fallen 55% year to date, compared to a 35% decline in the SOX index.

Read: Chip stocks could fall another 25% as ‘we’re entering worst semiconductor downturn in a decade,’ says analyst

That sharp decline in demand and supply chain problems helped drive the data center to become Nvidia’s largest unit with a quarterly revenue contribution of $3.81 billion, a 61% year-over-year gain, compared to a 33% drop on gaming sales to. $2.04 billion from a year ago, according to the company’s latest earnings report.

Read: Nvidia’s big reset has analysts wondering if the company is now in the clear

“Following the July quarter report and recent revelations about China’s licensing restrictions for the latest AI computing platforms, it’s no surprise that sentiment around Nvidia has been relatively cautious,” wrote Raymond James analyst Melissa Fairbanks in a recent note.

“In particular, inventory clearance of 3000-series GPUs continues to significantly affect order rates, and may carry over to the 4000-series launch,” Fairbanks said. “Providers indicate that the actual volume ramp will be a little more muted compared to normal launch.

Citi Research analyst Atif Malik, who has a buy rating on Nvidia, said he expects October availability for the Lovelace-based gaming chips, which are twice as fast as Ampere gaming cards.

Read: Nvidia’s ‘China Syndrome’: Is the stock melting?

Regarding the data center, Malik said Wall Street expects a slowdown in data center growth during the quarter ending in April. Recently, Tom’s Hardware revealed that Nvidia’s H100 GPU “Hopper” was tested as more than 4.5 times faster than the A100 itself, citing data from the MLCommons machine learning benchmarking group.

While Malik is not expecting further financial updates, he expects gaming sales for the quarter ending in October to be slightly above the Street consensus of $1.45 billion and in line with the $3.85 billion consensus for data center sales.

Malik also said he will be watching for the “trajectory of gaming sales recovery, and an update on the potential loss of $400 million in forecast revenue due to China’s COVID restrictions.”

At last year’s fall GTC keynote, Huang introduced new tools to expand Nvidia’s Omniverse platform to include interactive AI avatars and data engines for training deep neural networks. This year’s conference runs until Thursday and is open to the public online.

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