Nvidia tanks as it cuts revenue guidance

Shares in technology company Nvidia tanked on Monday as it cut its revenue guidance due to "deteriorating macroeconomic conditions", mostly in China.

In an update for the fourth quarter of fiscal 2019, the group said it now expects revenue of $2.2bn, down from previous guidance of $2.70bn as consumer demand for its graphics processing units has taken a hit, with sales of certain high-end GPUs using its new Turing architecture lower than expected.

Founder and chief executive officer Jensen Huang said: "Q4 was an extraordinary, unusually turbulent, and disappointing quarter. Looking forward, we are confident in our strategies and growth drivers.

"The foundation of our business is strong and more evident than ever - the accelerated computing model Nvidia pioneered is the best path forward to serve the world’s insatiable computing needs. The markets we are creating - gaming, design, HPC, AI and autonomous vehicles - are important, growing and will be very large. We have excellent strategic positions in all of them."

Nvidia, whose previous guidance for the gaming division had embedded a sequential decline due to excess mid-range channel inventory, said revenue in Datacenter also came in short of expectations.

"A number of deals in the company’s forecast did not close in the last month of the quarter as customers shifted to a more cautious approach. Despite these near-term headwinds, Nvidia has a large and expanding addressable market opportunity in AI and high performance computing, and the company believes its competitive position is intact."

The company also said it expects GAAP and non-GAAP gross margins to be impacted by about $120m as a result of "charges for excess DRAM and other components" associated with its new forecast for the fiscal fourth quarter.

At 1500 GMT, the shares were down 16% at $134.46. Rivals AMD and Micron were also in the red, trading down 7.4% to $20.31 and 1.9% to $38.23, respectively.

"While we were not surprised by the negative announcement as we lowered estimates one month ago on inventory issues, the magnitude suggests a notable slowdown in DataCenter," said RBC Capital Markets.

"While we view the gaming issues as unsurprising, we think the incremental softness on gross margins suggests a continued pause in DataCenter. With this in mind, we think the next three to four months will remain challenging until we see a return to growth in 2H19 for both gaming and DataCenter."

CMC Markets analyst David Madden said: "The stock has been in an aggressive downtrend since October, and if the bearish move continues it might target the $125.00 region."