Is Nvidia Stock Expected To Rise?
Business
In the field of artificial intelligence computing, Nvidia is one of the leading companies and one of the largest graphics-chip makers. Based in Santa Clara, California, the company was founded in 1993 and is a pretty young company compared with other semiconductor companies. It was Nvidia’s creation of the graphics processing unit (GPU), an essential component of PCs, in 1999 that revolutionized parallel computing, revolutionized modern computer graphics technology, and revolutionized the PC gaming market. COVID-19 also had a positive influence on Nvidia because people tend to spend more time playing games or working at home. In addition, the demand for cloud computing and artificial intelligence computing has increased during these years.
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However, Nvidia this year had one of the worst performances among the tech stocks. In the past month, the stock of Nvidia has decreased 24.32%, and in the past 6 months, the stock price has decreased 36.94%. In the past year, it even decreased by 40.58%. According to the company report, in the second quarter, the total revenue is 19% lower than expected. So what caused the worse and worse performance of Nvidia?
The Nvidia revenue mainly comes from two parts: the graphics segment which includes the graphics processing unit (GPU) for PCs. The graphics segment is the largest segment of its. revenue in the recent report accounts for 58% of its revenue. The other main segment is the computed and networking segment which includes Accelerated computing, AI, and its data center. During the second quarter of fiscal 2023, the slowdown in gaming chip demand largely caused the decrease in revenue. The underperformance in gaming products and the reduced channel partner sales are due to macroeconomic headwinds. In addition, the supply chain transition difficulty also caused a challenge to its performance.
The reduced business with Russia and China has also reduced the sales of the chips of Nvidia.
Nvidia reported that US government officials prohibited sales of its most advanced AI chips to China and Russia. This new ban on AI chip sales will have a significantly negative influence on Nvidia’s data center and cause a loss in the number of customers in China which is the second-biggest market for Nvidia chips in the world. According to the company, the new measures affected a $400 million revenue business. The COVID-related manufacturing hub shutdown in China harmed Nvidia as well. In addition, the COVID-related lockdown in China will make the supply chain transition worse.
In addition, Nvidia also faces rising competition in the semiconductor market. China’s Semiconductor Manufacturing International Corporation had a breakthrough in semiconductor chips. The company could produce the 7nm semiconductors without using the advanced equipment which became banned by US export. It is possible that it cannot only produce on a large scale domestically. But also export the semiconductors all over the world. Which will threaten the business of Nvidia. In addition, the ban on AI chip sales from the US will make domestic customers. And the government in China prefer the products domestically.
Written by Yue Zhang
