Nvidia Investors: Warning, Schwarning

SAN FRANCISCO -- Despite slashing expectations for fourth-quarter revenue, Nvidia(NVDA) may have drawn a line in the sand for tech investors who want (need?) to believe the economic worst-case scenario is already baked into stocks.

Following financial warnings by semiconductor companies Intel(INTC) and Advanced Micro Devices(AMD) that chipped away at the credibility of expectations for all other companies in the sector, the Santa Clara, Calif.-based graphics chipmaker finally conceded Tuesday that it, too, is feeling the pain.

Nvidia said it now expects to report fourth-quarter revenue that is 40% to 50% lower than the nearly $900 million it posted in the third quarter, due to the "further weakness in end-user demand and inventory reductions by NVIDIA's channel partners in the global PC supply chain."

Nvidia's new estimate suggests fourth-quarter revenue of $448 million to $538 million, which is about as far from analysts' consensus estimates ($805.5 million) as a company would want to be.

The announcement was somewhat fortuitous timing for the prognosticators at investment bank Wedbush Morgan, which a day earlier had lowered their estimates on Nvidia after milling around last week's Consumer Electronics show in Las Vegas. Wedbush cited a new "sobering view" of the quarter, despite defending the stock for the long term.

On the other hand, Wedbush's lowered estimates for Nvidia -- to revenue of $745.4 million -- were significantly off the mark, and the firm's contention that expectations for a "weak" quarter were already reflected in the stock begs for a rethinking.

Think about it: A year ago, Nvidia posted sequential fourth-quarter revenue growth of almost 8%. Now, revenue could slide as much as 50% to a little more than $500 million.