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Nvidia Tumbles After Lockdowns, Ukraine War Hurt Forecast

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Nvidia Tumbles After Lockdowns, Ukraine War Hurt Forecast
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(Bloomberg) -- Nvidia Corp., the largest U.S. chipmaker by market value, slid in premarket trading after China’s Covid-19 lockdowns and the war in Ukraine weighed on its sales forecast.

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Revenue in the current quarter will be roughly $8.1 billion, the company said in a statement Wednesday. That compares with an $8.44 billion average analyst estimate, according to data compiled by Bloomberg.

The outlook reflects the continuing supply-chain chaos in China, where Covid-19 lockdowns have disrupted production and transportation lines. That’s made it harder for companies like Nvidia to capitalize on still-growing demand for chips.

Nvidia also cited Russia, which invaded Ukraine and drew widespread sanctions earlier this year, for hurting its outlook. Together, the problems will cut sales by about $500 million this quarter, Nvidia said.

“The supply chain has been problematic,” Chief Executive Officer Jensen Huang said on a conference call with analysts. “We’re doing our best.”

The shares fell about 5.5% in premarket trading in New York, up from a drop of as much as 10% in extended trading. Nvidia’s stock had gained 5.1% before the close on Wednesday, but remained down 42% for the year -- the victim of a broader rout afflicting the chip market.

Investors have grown concerned that a surge in semiconductor demand during the pandemic years will fade, setting up one of the industry’s hallmark boom-and-bust cycles. But Nvidia’s growth in its fiscal first quarter suggests that demand remains strong.

Revenue gained 46% to $8.29 billion, topping the $8.1 billion average analyst estimate. Excluding certain items, profit was 1.36 a share, compared with an average estimate of $1.30.

Revenue from data-center chips grew 83% to $3.75 billion, also above projections. Cloud providers are increasingly relying on Nvidia’s processors to handle artificial intelligence. That’s helped Huang transform the company from a niche graphics-card manufacturer to a chipmaking powerhouse.

“We expect to see data-center demand remain strong,” he said on the call.

Gaming revenue climbed 31% to $3.62 billion last quarter, while so-called professional visualization sales rose 67% to $622 million. A weak spot was automotive revenue, which declined 10%.

Nvidia’s gross margin, the percentage of sales remaining after deducting costs of production, will be roughly 66% this quarter -- in line with the previous three months.

Nvidia’s tepid outlook overshadowed its strong results -- and it follows similarly downbeat forecasts from other major tech providers. Companies such as Cisco Systems Inc. and Applied Materials Inc. have cut guidance because of the situation in China.

Nvidia Chief Financial Officer Colette Kress said that China lockdowns also have softened demand locally. “You have very large cities that are in full lockdown,” she said. “So it’s impacting our demand.”

Russia, meanwhile, has historically represented about 2% of Nvidia’s revenue. And it’s been an even bigger piece of the company’s gaming business, Huang said. Nvidia halted sales to the country earlier this year following the Ukraine invasion.

The full impact of the situation and China in Ukraine, Huang said, is “difficult to predict.”

(Updates with conference call starting in fifth paragraph, shares.)

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