Shares of Nvidia (NASDAQ: NVDA) fell sharply after the chipmaker cut its Q2 guidance to reflect weakness in gaming sales.
Meanwhile, Speaker of the House Nancy Pelosi, disclosed the selling of some of the shares of NVIDIA Corporation, according to Capitol Trades. In particular, Pelosi’s husband sold over $4 million worth of shares in Nvidia.
Pelosi and her husband are known for buying and selling shares and options during her tenure in office, but the most recent sale might have been influenced by her husband Paul Pelosi’s recent deal, which attracted attention from the media.
Why Did Nvidia Cut Its Guidance?
Nvidia said it anticipates second-quarter revenue of $6.70 billion, down 19% from the preceding quarter and failing to meet the $8.10 billion estimate. The decrease in sales of gaming items, which was reflected in a decline in channel partner sales, was principally responsible for the shortfall. This was most likely caused by macroeconomic factors.
Gaming revenue is estimated to be $2.04 billion, down 44% from the previous quarter and 33% compared to last year. Revenue from data centers increased 61% Year over Year to $3.81 billion. The tech giant also reported a provisional adjusted gross margin of 46.1%.
“Our gaming product sell-through projections declined significantly as the quarter progressed,” founder and CEO of NVIDIA Jensen Huang said.
“As we expect the macroeconomic conditions affecting sell-through to continue, we took actions with our Gaming partners to adjust channel prices and inventory.”
Inflation worries are becoming more widespread throughout the U.S. economy, forcing customers to think about buying products like computers and video game consoles. However, the CFO of NVIDIA Colette Kress, isn’t too worried about gross margin on a long-term basis.
“We believe our long-term gross margin profile is intact. We have slowed operating expense growth, balancing investments for long-term growth while managing near-term profitability. We plan to continue stock buybacks as we foresee strong cash generation and future growth,” Kress said.
Samsung Warning Hinted at Chip Demand Weakness
Despite reporting its highest second-quarter net profit in the previous four years, Samsung Electronics issued recently a warning that chip demand from smartphone and PC manufacturers will decline even further in the second half of the year.
The company named geopolitical unrest, inflationary worries, and rising component and shipping costs as the main reasons why its mobile division saw profits decline. Additionally, the Covid-19 lockdowns in China, the largest smartphone market in the world, have worsened supply-chain issues even more.
“In the memory business, server demand is expected to remain solid while PC and mobile demand is likely to see continued weakness,” a Samsung representative said earlier.
The mobile business contributed with profits of 2.62 trillion won, adding to a total of 14.1 trillion won ($10.8 billion) for the quarter, topping the 14 trillion won analysts’ estimate. Samsung also reported its sales increased by 21% to 77.2 trillion won.
“Fundamental demand for server (memory chips) will stay solid as the investments in core infrastructure and new growth areas such as AI and 5G are expected to keep expanding, centering on major data center companies,” Samsung said.
In response to Samsung’s warning, shares of US semiconductor companies like Micron Technology (NASDAQ: MU), AMD (NASDAQ: AMD), and Nvidia (NASDAQ: NVDA), fell modestly.
Summary
Nvidia issued preliminary results to note weakness in the gaming sector that will weigh on the previously-shared second-quarter guidance. As a result, shares of Nvidia fell as the tumble in demand seems to be bigger than expected.
