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January 28, 2019updated 29 Jan 2019 9:00am

NVIDIA CEO: “Extraordinary, Unusually Turbulent, Disappointing” Q4

"Chicken-and-egg phenomenon" for ray-tracing GPUs

By CBR Staff Writer

NVIDIA CEO Jensen Huang has blamed deteroriating macroeconomic conditions for a fourth quarter revenue warning today – admitting as well that the cost of the company’s high-end gaming GPUs may have left customers waiting for a lower price point.

Shares in the Santa Clara-based company fell 14.7 percent premarket to $136.69. Revenue is how expected to be $2.2 billion rather than $2.7 billion, with gross margin within 100 bps of 56 percent (previously 50 bps of 62.5 percent).

A Chinese slowdown in particular hit gaming GPU sales, with anticipated datacentre deals also failing to close.  Jensen Huang, founder and CEO of NVIDIA said: “Q4 was an extraordinary, unusually turbulent, and disappointing quarter.”

NVIDIA CEONVIDIA CEO: Customers Awaiting Lower Price Points

Deteriorating macroeconomic conditions, particularly in China, impacted consumer demand for NVIDIA gaming GPUs, the company said.

“Sales of certain high-end GPUs using NVIDIA’s new Turing architecture were lower than expected.  These products deliver a revolutionary leap in performance and innovation with real-time ray tracing and AI, but some customers may have delayed their purchase while waiting for lower price points and further demonstrations of RTX technology in actual games.”

Ray tracing has been used to make CGI in films for some time, but it is very computationally heavy and it is even more stressful on GPU’s if they are asked to do the work in real-time, as a video game would require. Few video games sold today can take advantage of the capability.

Read this: New Ray Tracing NVIDIA GPU “Most Important” in a Decade

AI startups“We suspect that as more games become available supporting ray tracing, demand should get better, but currently there is a chicken-and-the-egg phenomenon apparently going on,” Bernstein analyst Stacey Rasgon said.

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In its datacenter segments revenue also came in short of NVIDIA’s expectations.

A number of deals in the company’s forecast did not close in the last month of the quarter as customers shifted to what NVIDIA described as “a more cautious approach.”

“The foundation of our business is strong”, the company reiterated. “The markets we are creating – gaming, design, HPC, AI and autonomous vehicles – are important, growing and will be very large. We have excellent strategic positions in all of them”.

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