What's in store for Nvidia in 2023?
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NVIDIA: Chip of the old block!
Shares of Nvidia (NVDA) have suffered over the past year, with the price falling 50% so far. The graphics card (GPU) market has seen sharp decreases this year, with global shipments falling by 25.1% in the third quarter of 2022. The entire PC market was impacted by decreased customer demand, which was principally caused by inflationary increases.
How did they perform?
Sales for Nvidia's third quarter fiscal results were above analysts' estimates, although earnings per share were below average. The business attributed the inventory charge for the third quarter's gross margin decline of 11.6 percentage points to 53.6% to China's weak demand for data centre chips. Revenue decreased 17% from the previous year.
The gaming segment of Nvidia reported $1.57 billion in sales, a 51% decrease from the previous year. Nvidia claimed that because merchants have more inventory than there is now demand, it is selling less to them. It claimed that consumer demand is being harmed by both macroeconomic factors and China's zero-Covid policy.
A few of Nvidia's smaller business segments include automotive chips and professional visualisation. The annual revenue for professional visualisation decreased by 65% to $200 million. Automotive sales were $251 million, an extremely tiny increase of 86%.
The business's "other" division recorded revenue of $73 million. It contains the bitcoin mining chips from Nvidia (CMP). Sales of the CMP chips, according to the business, were "minimal." For the current quarter, Nvidia anticipates that its gross margin will increase to between 63.2% and 66.0%. Nvidia reported that during the quarter, it paid out $3.75 billion in dividends and share repurchases.
Opportunity galore
The company's domination of the consumer GPU market, which gives it actual leverage in the sector to combat the escalating competition, is chiefly responsible for Nvidia's rise in the tech world.
In 2017, Nintendo's Switch, one of the most popular video game systems ever, selected Nvidia as its sole processor and graphics supplier. More than 114 million Switch consoles had been sold as of November, and an equal number of Nvidia's custom processors had entered widespread usage.
According to numerous sources, Nintendo is presently working on the Switch sequel, which might be released as soon as 2023. Every two years, starting in 2017, Nintendo has introduced a new Switch console model, including a Lite model in 2019 and an OLED Switch in 2021.
Sales of the console's revamped sequel would increase dramatically since Switch users would want to replace their old systems. If so, Nividia could benefit significantly from its pivotal role in the creation of the Nintendo Switch.
Even though Nvidia is best recognised for its PC products, it also operates a successful data centre business. Data centres accounted for the largest share of Nvidia's revenue in the third quarter of 2022. The division brought in $3.8 billion, a year-over-year increase of 30.5%, and was responsible for 64.6% of the quarter's revenue.
To create a massive cloud AI computer, Nvidia and Microsoft's Azure launched a multi-year agreement in November. The partnership will use GPUs from Nvidia as well as the supercomputing infrastructure from Azure. The partnership might be quite profitable for Nvidia's long-term future, given that Azure controls a rapidly growing 25% market in cloud computing.
Investors are understandably worried about the tech behemoth, given Nvidia's 72% market share in discrete GPUs. Despite a setback in 2022, Nvidia's long-term prospects seem unaffected. However, we can only anticipate what's in store for the company.
Market Reaction
NVDA ended at $141.21, down 7.14%.
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