Opinion: Nvidia has faced this kind of slowdown before and seems to have a specific goal in mind this time around

Opinion: Nvidia has faced this kind of slowdown before and seems to have a specific goal in mind this time around

Nvidia Corp. it’s been through this kind of crisis before, and this time, executives are adopting more aggressive tactics to overcome it.

Nvidia NVDA,
+0.24%
executives warned Wall Street on Wednesday that revenue in its next fiscal quarter would be about $1 billion below analyst expectations, due to supply chain problems and a sudden slowdown in consumer demand for gaming products. This forecast suggests that quarterly revenue will decline about 14% year-over-year in the current quarter.

The last time Nvidia suffered from a glut of gaming chips, during the “crypto hangover” of 2019, revenue fell year-over-year for four straight quarters. More importantly, it swallowed nearly an entire product cycle for Nvidia – the launch of its Turing architecture took a toll as gamers delayed their purchases to wait for lower prices and more games being designed around the technology.

To learn more: Chip inventories have plummeted as pandemic demand for electronics has plummeted, but there are still some winners

In an interview with MarketWatch on Wednesday, Nvidia CFO Collette Kress said executives are trying to be much more forceful and decisive early on in the process of this downturn, effectively looking to rip the band-aid off before new products arrive. Nvidia made a $1.22 billion inventory write-down so its channel partners could lower prices and move existing Nvidia products faster before new ones were released.

“We are taking different actions,” Kress said Wednesday. “This time it’s about working really fast on stock corrections. We haven’t even started introducing the new product yet. We adjust prices on the channel.”

Even so, the news initially did not please Wall Street, which was worried about the future of gaming revenue. In after-hours trading, the shares were down nearly 5%. Nvidia said gaming revenue will decline sequentially in the upcoming fiscal third quarter from the quarter just reported. Nvidia’s gaming revenue was $2.04 billion, down 44% sequentially and down 33% year-over-year. In the April quarter, gaming peaked at $3.6 billion in revenue.

While analysts tried to get a sense of what the growth rate of games will be in the future, Kress remained optimistic.

“While gaming faces significant short-term macroeconomic challenges, we believe the long-term fundamentals in gaming remain strong,” she said.

See also: Cathie Wood dumps Nvidia shares ahead of results

Nvidia announced its new chip architecture, dubbed Hopper by famed programmer Grace Hopper, in March, but products with the chips haven’t hit the market. in large scale still. Based on previous announcements, Nvidia execs are likely to detail new gaming cards using Hopper chips at their fall GTC event, scheduled for September 19-22.

“We’re going to get through this in the coming months and go into next year with our new architecture,” Nvidia co-founder and chief executive Jensen Huang told analysts on a conference call. “I look forward to telling you more about this at the GTC next month.”

If Nvidia wants to get out of this crisis faster and avoid a protracted crisis, executives are going to need more than a quick stock move – maintaining the 60% growth of the data center category, as reported on Wednesday, would be a good move. start. However, at least it looks like the execs have learned from their latest trip through the semiconductor sales cycle and are hopeful for a quicker turnaround this time around.

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