Nvidia’s share price pushed higher on the back of the mixed second-quarter update last night. EPS was $1.24, and the consensus estimate was $1.15. Revenue fell by 17% compared with the same period a year ago, and it came in at $2.58 billion, but it managed to exceed the $2.54 forecast.
The gaming division is the largest division of the business, and unit saw revenue fall by 27% on an annualized basis to $1.31 billion, which narrowly topped the $1.30 billion forecast. Graphics cards for desktop PCs and system-on-chip components for gaming systems saw declines in demand.
Last year, the company had record sales but now thanks to the slowdown in China and the major drop-off in demand for crypto mining chips, the group is coming off the boil, and the numbers that were posted last night is the ‘normalization’ of the business. Nvidia’s outlook was mixed, but it didn’t seem to faze traders. Then group predicts that third-quarter revenue will be in the region of $2.84 billion and $2.95 billion, while the consensus estimate was $2.97 billion. Gross margin for the next quarter is tipped to come in between 62% and 63%, but that comfortably forecasts of 60.2%.
The US-China trade spat has a technological component to it, as national security and intellectual property rights are major concerns for the US. Huawei has been at the center of the dispute, and recently President Trump said he ‘won’t do business’ with the company, and that has proved to be problematic for the likes of Intel (NASDAQ:INTC), Broadcom (NASDAQ:AVGO), and Qualcomm (NASDAQ:QCOM) as they are the supplier of the Chinese tech giant. Nvidia suffered as a result of the clampdown too, and the group’s advancements in artificial intelligence should ensure that is diversified from any further fallout.
Bitcoin and other cryptocurrencies like ethereum enjoyed a rally into June, and it put digital currencies back on the radar for many investors. Facebook (NASDAQ:FB) revealed plans to launch its own digital currency, Libra, and that fuelled the recent rally across the board. Mr. Trump called for tighter regulation on Libra, and that took the wind out of the sails of the crypto rally. Nvidia benefitted from the crypto mining boom in 2017, and should we see a similar craze, the group should stand to benefit.
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