Nvidia (NVDA) – Get NVIDIA Corporation Report shares moved lower in pre-market trading after the chipmaker posted stronger-than-expected fourth quarter earnings but issued a muted-near term outlook for profit margins.
Nvidia said current quarter revenues would rise to around $8.1 billion, plus or minus 2%, following on from a January-quarter tally of $7.64 billion, thanks to what CEO Jensen Huang called “exceptional demand for NVIDIA computing platforms” that will offset semiconductor industry supply constraints.
Nivdia had record gaming sectors revenues of $3.42 billion, as well as an all-time peak in data center revenues of $3.26 billion, driven by hyperscale and cloud computing demand. However, slowing sales of its ‘CMP’ chips, which are used by cryptocurrency miners, added a degree of concern to the chipmaker’s near-term outlook, with gross margins likely holding at the 67% mark for the current quarter.
“We believe while the Datacenter business is a tailwind, that is more than being offset by a product mix in the gaming business … supply-chain related costs are a counterbalancing factor as well.,” said BMO Capital Markets analyst Ambrish Srivastava, who carries an outperform rating with a $375 price target on the stock.
“Visibility into the Datacenter business continues to be very strong,” he added. “Supply appears to be gradually catching up with demand, and should see a meaningful increase in the second half of the year.
Nvidia shares were marked 3.25% lower in pre-market trading to indicate an opening bell price of $256.50 each, a move that would still leave the stock with a six-month gain of around 32%
Huang also addressed the issue of Nvidia’s failed attempt to buy chip designer Arm Holdings from Japan’s SoftBank; the $40 billion deal collapsed earlier this month amid pushback from regulators in Britain, the U.S. and China.
“For over a year, we worked closely with SoftBank and Arm to explain our vision for Arm and reassure regulators that NVIDIA would be a worthy steward of the Arm ecosystem,” Huang told investors on a conference call late Wednesday. “We gave it our best shot, but the headwinds were too strong, and we could not give regulators the comfort they needed to approve our deal. NVIDIA’s work in accelerated computing and our overall strategy will continue as before.”
“Whether x86 or Arm, we will use the best CPU for the job,” he added. “And together with partners in the computer industry, offer the world’s best computing platform to tackle the impactful challenges of our time.”
