Nvidia Issues Revenue Alert As Trade War Continues

Nvidia shook the semiconductor industry with a profit warning late on Monday, in a move that follows similar alerts from Apple and Intel.

The chipmaker cut its fourth-quarter revenue forecast by half a billion dollars, in news that sent its shares tumbling in early trading.

Nvidia blamed a slow gaming market in China and caution from data centre companies for the revised figures.

The warning comes amidst slowing growth in China that also saw Apple cut its expectations earlier this month.

China slowdown

China’s slowing growth, in turn, occurs in the context of US-China trade tensions that have seen the US directly target several of China’s biggest tech companies, including Huawei and ZTE.

DRAM maker Fujian Jinhua, a start-up founded in 2016 that has been linchpin of China’s efforts to reduce its dependence on imported semiconductors, is likely to cease production by March after being hit by a US export ban last year.

Nvidia’s key markets include gaming and specialised AI chips for data centres and autonomous cars, as well as semiconductors for the production of cryptocurrencies.

Last year its cryptocurrency sales were hit by slowdowns in most major virtual currencies, and this week it said “deteriorating macroeconomic conditions, particularly in China” had affected its gaming business.

Meanwhile, a number of major data centre deals failed to complete at the end of last year “as customers shifted to a more cautious approach”, Nvidia said.

Data centres accounted for about 25 percent of Nvidia’s revenues in the third quarter of 2018.

Intel has also signalled that weaker capital spending by cloud companies was the cause for a shortfall likely to continue through the first half of this year.

‘Extraordinary, turbulent quarter’

“Q4 was an extraordinary, unusually turbulent, and disappointing quarter,” Nvidia chief executive Jensen Huang said.

The company said it expects its fourth quarter revenues to be about $2.2 billion (£1.7bn), down from earlier expectations of $2.7bn.

It plans to take $120m in charges for the quarter related to  “current market conditions”.

Nvidia plans to disclose quarterly results in mid-February.

Following Monday’s declines, the company’s shares have declined more than 53 percent since early October.

China has said earnings at industrial companies shrank for a second month in December, hit by diminished factory activity amidst the ongoing trade war with the US.

US and Chinese officials are set to meet later this week to continue trade negotiations.