Nvidia Corp. (NVDA - Get Report) shares plunged Friday after the chipmaker posted weaker-than-expected third quarter sales, and issued a gloomy holiday quarter outlook, as inventories piled up amid a slowdown in demand from cryptocurrency miners.
Nvidia said revenues for the three months ending in January, the company's fourth quarter, would rise to around $2.7 billion, well shy of the $3.4 billion previously forecast by analysts, thanks in part to a fall-off in demand for chips used in digital currency mining and a build-up in gaming chips that had become too expensive for buyers amid last year's bitcoin mining boom. That outlook offset solid third quarter earnings of $1.84 per share and a 20.7% rise in total revenues to just under $3.2 billion.
"We came into Q3 with excess channel inventory post the crypto hangover," CEO Jensen Huang told investors on a conference call late Thursday. "I'm hopeful that now that pricing has stabilized, that customers will come back and buy. I guess when pricing is volatile in the channel, it probably freezes some people waiting for prices to stabilize, and that took longer than we expected frankly."
Nvidia shares were marked 19.5% lower at the opening bell Friday and changing hands at $163.50 each, the lowest in more than a year and a move that will lop more than $21 billion in market value from the Santa Clara, Calif.-based tech group.
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"The large shortfall in guidance due to a bloated channel due to crypto-currency is in sharp contrast to the comments around channel inventory from the company at the last earnings call," said BMO Capital Markets Ambrish Srivastava. "Our estimates and target price are going lower."
Nvidia's outlook reflects not only ongoing concerns for the health of the chip sector, which has seen the Philadelphia Semiconductor Index shed more than 14.1% over the past six month, but also broader concerns for consumer tech demand.
Applied Materials Inc. (AMAT - Get Report) were marked 2.14% lower at $34.27 after the semiconductor equipment maker guided for weaker-than-expected sales over its fiscal first quarter following disappointing earnings after the close of trading Thursday.
Apple Inc. (AAPL - Get Report) shares were marked 0.36% lower in pre-market trading at $190.73 and, despite yesterday's $2.5% rebound, have fallen more than 18% since their early October peak amid persistent reports of iPhones sales weakness and pullbacks in capacity from some of its key suppliers.
Investors are also eyeing the possibility that President Donald Trump will launch a further round of tariffs on $267 billion worth of China-made goods, on top of 25% levies on $200 billion that will kick-in on January 1, if talks with President Xi Jinping later this month in Argentina prove fruitless.
Analysts have said the next phase of tariffs is likely to include a significant portion of consumer tech goods, including Apple iPhones, that will lift prices and blunt demand in the world's biggest economy.