Just over a year ago, Nvidia stock (NASDAQ:NVDA) was trading in the $340s, with the underlying Company burning on all cylinders. Total sales increased by 46% to new highs. Its video game division saw sales increase 31% to $3.62 billion, while data center demand, including artificial intelligence (AI), was off the charts, with sales increasing 83% to $3.75 billion.
Nvidia stock (NASDAQ:NVDA) was a Wall Street favorite, and the sentiment was quite positive. The good times were still going strong as 2022 approached.
Nvidia Stock:Unexpected Fortune Reversal
Fast forward to October 2022, and the earlier tailwinds have turned into headwinds as investor sentiment has likewise changed. The stock (NASDAQ:NVDA) is down (-62%) for the year, having recently hit 52-week lows of $108.13. The Wall Street darling became a pariah. The video game industry is still losing steam, with sales dropping by 33%. Investors are waiting for the other shoe to drop after earnings warnings from Advanced Micro Devices (NYSE: AMD), Marvell Technologies (NASDAQ: MRVL), Western Digital (NYSE: WDC), and Intel (NASDAQ: INTC). The United States imposed AI chip limitations on sales to China, resulting in $400 million in damage to the Company’s bottom line.
Nvidia Stock: The U-turn
NVIDIA revealed their fiscal second-quarter 2023 earnings for July 2022 on August 24, 2022. The Company reported an EPS profit of $0.51, excluding non-recurring items, compared to average analyst projections of $0.52, a (-$0.01) miss. Revenues increased 3% year on year (YoY) to $6.7 billion, meeting analyst expectations. Revenue from data centers increased 61% year on year to $3.81 billion. Gaming revenue declined by 33% year on year to $2.04 billion. Professional Visualization decreased by 4% to $496 million. Automotive and robotics revenue increased (45%) to $220 million. The share repurchase program has a residual balance of $11.93 billion till December 2023. Gross margins declined to 45.9% from 67.1% the previous year. Automotive is becoming a tech sector and is on pace to become our next billion-dollar industry. AI advances are propelling our Data Center business while also hastening advancements in disciplines ranging from medical research to climate science to robotics.”
The Bright Side
In the second part of the year, Nvidia will release the newest products in company history. The new product cycle should alleviate some of the slowness and may cause a decline in the current quarter. As previously stated, Gaming and Professional Visualization clients are clearing out inventory levels to make space for next-generation product releases. Much of the slowdown might be attributed to purchasers deferring purchases to spend during the new product cycle. The United States’ limits on selling artificial intelligence processors to China do not go into force until the second half of 2023, and things might change before then since China’s economy is rapidly deteriorating. The market may overshoot on the downside since the bar is set very low for fiscal Q3 2022 profits.
Featured Image – Megapixl © Andreistanescu
Author Okoro Chinedu 
