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Nvidia Issues Pessimistic Earnings Outlook as Videogame Industry Slows Down

Industry: Semiconductors
Current: Company Performance

Nvidia reported a steep drop in revenue in the third quarter of 2022
The company's revenue fell 17% YoY to $5.93 billion
Revenue from data centers increased 31% YoY in the third quarter of 2022, while revenue from gaming decreased by 51%

Nvidia's Sales Decline by 17%, but Data Centre Growth is Still Robust

Nvidia Corp., one of the largest chipmakers in the US provided a cautious outlook and revealed a steep drop in quarterly revenue due to falling customer demand for its video gaming processors following a pandemic-fueled boom. The company's revenue fell 17% YoY to $5.93 billion as gaming-segment sales more than halved in the third quarter of 2022. Revenue from data centers increased 31% year over year in the third quarter of 2022, while revenue from gaming decreased by 51%.

Nvidia and other chip makers have been severely impacted due to growing pressures on consumer spending, including high inflation and rising interest rates, and a wave of cost-cutting and layoffs across the sector. They are also battling with the reversal of the pandemic-driven increase in demand for electronics, which led to a shift toward working and learning from home.

The company is also being affected by new export restrictions imposed by the United States that have an impact on Nvidia's most advanced chips used in data centers for artificial intelligence calculations. Since then, the business has started selling substitute chips in China that perform below the levels required for a U.S. license. The business issued a warning in August 2022 that the limits, which are intended to restrict China's AI capabilities, may reduce its quarterly revenues by as much as $400 million. The restrictions had an impact on quarterly sales, but the decline was "roughly mitigated" by the sale of substitute products in China.

Another chipmaker, Micron Technology Inc., recently announced that it is reducing its production goals for the upcoming year and that it was working to decrease capital investment further, citing a recent deterioration in its market forecast. It joined a group of chip manufacturers who released gloomy forecasts this year.

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