It turns out Nvidia (NASDAQ: NVDA) is facing just as much market pressures as its competitor, Advanced Micro Devices (NASDAQ: AMD). Just as shares of AMD fell after its earnings report, due to weak graphics card sales, Nvidia has the same problems. Nvidia’s core hyper-growth markets are slowing. As such, its previously high share price multiples are no longer justified.
Nvidia reported earnings of $1.84 a share as revenues rose a respectable 20.5%, to $3.18B. But the company guided lower Q/Q revenue. Datacenter, professional visualization and automotive all hit record levels in the quarter. Weak gaming markets became a drag on results and will continue to hurt results. Should investors have known in advanced? Electronic Arts (NASDAQ: EA) and Activision (NASDAQ:ATVI) both forecast weak quarters ahead. Nintendo (OTC:NTDOY) stock fell late last week on a valuation compression (lower P/E).
While Nvidia claimed gaming and crypto are weak, it is not admitting to a low uptake in sales of its RTX 2080 cards. Tech sites already warned consumers that these overpriced GPUs do not give the best price/performance. Instead, current-generation GTX 1080’s and lower models are better buys, hurting profit margins.
Nvidia stock will lag until GPU demand picks up. That might require a price cut on the RTX cards. In the data center space, capital expenditure will have to go up to keep enterprises happy with the latest, high-performance offered from Nvidia’s accelerated computing platform.
