MarketWatch First Take: Nvidia has faced this type of downturn before, and seems to have a specific goal in mind this time

by | Aug 24, 2022 | Stock Market

Nvidia Corp. has been through this type of downturn before, and this time executives are taking more aggressive tactics to overcome it. Nvidia
NVDA,
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executives warned Wall Street on Wednesday that revenue in its next fiscal quarter would be roughly $1 billion below analysts’ expectations, due to supply chain-issues and a sudden slowdown in consumer demand for gaming products. That forecast suggests that quarterly revenue will decline by roughly 14% year-over-year in the current quarter.

The last time that Nvidia suffered a glut in gaming chips, during the “crypto hangover” of 2019, revenue declined year-over-year for four consecutive quarters. Most important, it swallowed nearly an entire product cycle for Nvidia — the release of its Turing architecture was marred, as gamers delayed their purchases to wait for lower price points and for more games to be designed around the technology. For more: Chip stocks tanked as pandemic demand for electronics slumped, but there are still some winners In an interview with MarketWatch on Wednesday, Nvidia Chief Financial Officer Collette Kress said that executives are trying to be much more forceful and decisive early in the process of this downturn, effectively looking to rip off the band-aid before new products arrive. Nvidia took a $1.22 billion inventory write-down so that its channel partners can drop prices and move Nvidia’s existing products faster before new ones are launched. “We are taking different actions,” Kress said Wednesday. “This time it is about working very fast on the inventory corrections. We haven’t even started that new-product introduction. We have adjusted pricing in the channel.” Even so, the news did not initially sit well with Wall Street, which was concerned about the future of gaming revenue. In after-hours trading, shares fell nearly 5%. Nvidia said gaming revenue will be down sequentially in the upcoming fiscal third quarter from the quarter it just reported. Nvidia’s gaming revenue was $2.04 billion, down 44% sequentially and down 33% year-on-year. In the April quarter, gaming reached a peak of $3.6 billion in revenue. As analysts tried to get a sense of what the growth rate for gaming will be going forward, Kress remained optimistic. “While gaming navigates significant short-term macroeconomic challenges, we believe the long-term fu …

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