AI

The semiconductor slump hits stateside with Nvidia’s latest earnings report

America’s largest chipmaker fell short on earnings per share and Q3 revenue expectations. Could its data-center business save the day?
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Francis Scialabba

· less than 3 min read

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Nvidia, the nation’s largest chipmaker by market cap, reported earnings last week—and, in line with the current semiconductor slump, some of the company’s Q2 numbers missed the mark.

Weeks before last Wednesday’s earnings call, Nvidia had already lowered its estimates, but the company still fell short on earnings per share—and on Q3 revenue expectations, which, at $5.9 billion, fell $1 billion short of Wall Street analysts’ predictions. Net income for the company dropped 72% year over year, to $656 million.

“This was a challenging quarter,” Colette Kress, Nvidia’s EVP and CFO, said on the earnings call.

And on Monday, shares fell 8%, continuing a post-earnings report selloff.

A drop in demand for hardware, like graphics cards and PCs, hit Nvidia’s gaming business hard. Gaming revenue dropped 44% from Q1 and 33% year over year—a decline that was “sharper than anticipated,” Kress added.

The AI engine

There’s a potential bright spot on Nvidia’s balance sheet: its data-center business. The segment grew 61% year over year, although the company said its $3.81 billion revenue still fell short of expectations due to supply-chain issues.

The data-center business’s growth was largely thanks to North American cloud-computing giants. For instance, Pinterest began using 100x larger AI recommender models after it started to use Nvidia’s GPUs, and Tesla “upgraded its supercomputer to use over 7,000 A100 GPUs for autopilot training,” Kress said.

But the North American sales boost was “more than offset by lower sales to China hyperscale customers affected by domestic economic conditions,” according to Kress.

Executives are also optimistic about Nvidia’s next-generation H100 compute GPU, which is now in full production and should add to its data-center segment’s growth. Hopper, the underlying architecture, is designed to help train transformer-based large language models, the same kinds of AI models that underpin services like Google Search and Autocomplete.

One other area of growth for Nvidia: its automotive business, which, with $220 million in revenue, up 45% year over year, grew largely thanks to self-driving revenue. The company recently announced new vehicle partnerships with Chinese EV makers like NIO, Li Auto, and Baidu-owned Jidu.

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