Ever since Nvidia CEO Jensen Huang warned of a disappointing fourth quarter, investors have been wondering where to go with the stock.
After hitting a high of $292.76 on Oct. 2, Nvidia's (NVDA - Get Report) had a rough few months on a complicated mix of China weakness, a slowdown in cryptocurrency mining and other factors. In late January, Nvidia warned investors that quarterly revenue would fall well short of forecasts, at $2.2 billion versus earlier guidance of $2.7 billion, due to softer-than-expected demand for its gaming and datacenter products as well as slowing growth in China.
Here's what to watch for when Nvidia posts its fourth-quarter earnings on Thursday.
Turing UpdatesNvidia's recently launched Turing cards were long-awaited by consumers, but demand so far has looked a bit more tepid than many investors would like. Some of that is attributable to a rocky rollout, weakness in China, and the fact that Turing cards aren't supported by all games at this point, noted Cowen's Matt Ramsay in a Jan. 28 note: "We think as more games begin to more fully utilize Turing Ray Tracing, adoption should accelerate," he said. "We expect the near-term post-crypto inventory glut to be digested by mid- Spring leading to more normalized distribution channel and pricing/demand as NVIDIA launches the remainder of its mid-tier Turing portfolio." Investors will be tuned in to further guidance and commentary on Turing is performing, particularly with more support for key gaming titles rolling out in the coming months.
Details from Intel's (INTC - Get Report) latest earnings, which guided for softer datacenter revenue for the March quarter, may suggest a parallel scenario for Nvidia. The key question is whether slowing data center growth is a temporary or long-term condition for Nvidia, added Cowen's Ramsay. While Nvidia's products may carry an advantage as AI and machine learning processing demands grow, a downturn in cloud capital expenditures due to macroeconomic concerns could weigh down Nvidia's datacenter business for several quarters: "Until we get evidence that Cloud CapEx and growth resumes, our F2021 datacenter estimates comes down from $5.3B to $4.6B," Ramsay wrote.
Positive Signs from Other Segments
Despite challenges in gaming, crypto, China and elsewhere, it isn't all doom and gloom for Nvidia. As noted by RealMoney columnist Eric Jhonsa in December, Nvidia reported some encouraging growth in non-gaming lines of business in the third quarter -- including its automotive and professional visualization segments, which rose 19% and 28% respectively during that period. The former segment could see a further boost as some of Nvidia's partnership kick into gear: "Automotive revenue, which for now depends heavily on infotainment processor sales, should start getting a bigger lift from Nvidia's numerous autonomous driving-related engagements in the second half of fiscal 2020," Jhonsa wrote.