Nvidia drops half a billion from Q4 guidance

What a strange stretch it’s been for the graphics card market, particularly for Nvidia. At the moment, multiple factors have led the company to drop its guidance for Q4 2019 by half a billion dollars. Revenue expectations for the quarter are now $2.2 billion, down from $2.7 billion. According to CNBC, Nvidia shares dropped 12% after the new figures were announced.

According to Nvidia, and also what we can see with our own eyes, timing played a role in the current situation. While riding high on its Pascal architecture wins, the cryptomining boom threw everything out of whack for Nvidia. Demand spiked, and for a while there, it was hard to find any graphics cards to buy, let alone for a reasonable price. In an investor letter (PDF), Nvidia CEO Jensen Huang said that the company adjusted production in response, but then demand dropped off.

That left Nvidia with lots of inventory, largely mid-range Pascal GPUs, at a bad time—right around a new architecture launch. "We delayed the planned production ramp of several new products to allow excess channel inventory to deplete," wrote Huang. But the company’s ambitious Turing architecture launched in August with the announcement of the RTX 2070, 2080, and 2080 Ti graphics cards. The Titan RTX broke cover in December, and CES 2019 saw the debut of the mid-range RTX 2060 card and the mobile versions of RTX for laptops.

Turing’s promises are enormous and represent a new way of looking at graphics, beyond rasterization. But in a chicken-and-egg conundrum, RTX is facing a lack of widespread game support, which appears to be hampering sales. Huang suggests that customers are waiting for "further demonstrations of RTX technology in actual games," as well as for prices to drop, before plunking down their dollars.

Further, Huang cited global financial woes as having a negative impact on sales. "As we worked through Q4, the global economy decelerated sharply, particularly in China, affecting consumer demand for NVIDIA gaming GPUs," he said.

In other words, Nvidia has a lot of excess inventory that it’s struggling to move because of the global economy, a lack of demand from cryptominers, and its own new products. But the new gaming products aren’t picking up the slack either, because buyers don’t yet feel compelled to spring for RTX cards in droves.

A final tidbit involves Nvidia’s datacenter GPU business. Huang downplays missed sales expectations by saying, "Purchases can be large and are not always periodic or predictable." That is true enough, but it doesn’t assuage the concerns raised by the sentences that follow: "As the quarter progressed, customers around the world became increasingly cautious due to economic uncertainties. A number of deals did not close in the last month of the quarter." The issue, then, seems to be less about the natural ebb and flow of large datacenter customer purchases and more about global economics. One of those things is not like the other.

Predictably, Huang ended his investor letter on a high note, professing optimism in the company’s strategy and opportunities for more growth thanks to the appealing RTX 2060, RTX-powered notebooks, RTX workstation GPUs, more upcoming partnerships in the datacenter, and autonomous driving partnerships.

Final details will emerge during Nvidia’s February 14 earnings call, where the company will discuss Q4 2019 financial results and presents guidance on Q1 2020.

Comments closed
    • ronch
    • 9 months ago

    I think it’s also possible that most folks, even serious gamers, think their graphics cards are just fine and aren’t willing to spend big bucks on a new graphics card.

    • DavidC1
    • 9 months ago

    So,

    -Sequels after sequels in games
    -Micro transactions and DLCs in $60 games
    -Record consumer level debt all around the world
    -US dollar at multi-year highs.

    Nvidia decides to do what with it? Hey, how about we raise the prices across the board? We had $600 for the top of the line card just a few years ago. Now? The price point reserved for Titan(which itself was a money grab) is taken up by the 2080 Ti.

    You could call the main reason an “economic decline” but that’s too convenient of an excuse. Apple did the same thing raising the prices to an insane amount with the latest iPhones.

    Maybe the economic decline is happening because most major corporations are simultaneously being greedy?

      • Chrispy_
      • 9 months ago

      I’m actually in ageement on that.

      Look at Apple and iPhone prices. The megacorps are chasing the 0.001% who hold 99% of the wealth, and the rest of the planet is getting pissed off and refusing to play ball.

      • ronch
      • 9 months ago

      Yep. Everyone’s becoming more and more greedy. No wonder the world is falling flat on its face. (And no, the Earth ain’t flat, m’kay?)

      • strangerguy
      • 9 months ago

      Yup, the past decade of economic “recovery” is built on the back by far the largest debt binge in history, and was also lucky enough to experience massive growth in the form of smartphones. We are all going to face the blowback for the former, and there appears to be nothing revolutionary on the near horizon to pick up the slack of the latter now the smartphone adoption have peaked.

    • WaltC
    • 9 months ago

    Sigh..another nVidia apology piece…;)

    • AustinW
    • 9 months ago

    [quote<]Demand spiked, and for a while there, it was hard to find any graphics cards to buy, let alone for a reasonable price. In an investor letter (PDF), Nvidia CEO Jensen Huang said that the company adjusted production in response, but then demand dropped off.[/quote<] I think you're misinterpreting what Huang said. You're implying that they increased production in response to crypto demand, but what the investor letter actually says is, "We delayed the planned production ramp of several new products to allow excess channel inventory to deplete," which would imply that they delayed producing new parts in response to the decrease in demand.

      • Philldoe
      • 9 months ago

      One could argue that they allowed last gen stock to deplete so that people would be forced to buy the new stuff. I was banking on grabbing a 1080Ti a bit into the 2080Ti launch…only to find that the demand for the 1080 was so strong over the 2080Ti that the prices stayed high due to no new stock. Luckily I got a great deal on a new Vega 64 for $400.

    • blastdoor
    • 9 months ago

    Sounds like multiple companies are possibly being hurt down by a slowdown in China…

      • chuckula
      • 9 months ago

      Did you say…… [url=https://www.youtube.com/watch?v=RDrfE9I8_hs<]CHINA?!!?[/url<]

        • blastdoor
        • 9 months ago

        It’s sad, China is very, very weak.

          • Chrispy_
          • 9 months ago

          Maybe China could get Mexico to pay for it?

            • K-L-Waster
            • 9 months ago

            Should China shut down until Mexico pays for it?

    • rudimentary_lathe
    • 9 months ago

    I’m happy people are voting with their wallet. The Turing prices are absurd.

    Let’s hope AMD can keep the Navi price point the same as Polaris while increasing performance significantly – like how the GPU market worked for years before Nvidia jacked up pricing.

      • Chrispy_
      • 9 months ago

      I’m hoping AMD use Navi as a way to reduce power consumption. Polaris 10 launched at 150W with the RX480, which admittedly seemed to draw around 160W without the “compatibility mode” driver setting, but that was still decently power effecient and it undervolted like a champ for those that cared.

      Today we have the RX590 which sucks down around 50% more juice than an RX480 for a measly 15-20% more performance. They’re big, ugly, loud cards that can’t match an ageing GTX 1070 for performance despite using nearly twice as much power.

      AMD need to learn that people don’t want massive, heavy, triple-slot graphics cards weighing nearly 3lbs and dumping huge amounts of waste heat into our cases, and that’s not even considering the environmental or financial costs of power-hungry cards.

        • tipoo
        • 9 months ago

        I should think perf/watt will be a primary aim, not just because it just makes sense for everyone, but also that Navi is a shoe in for next gen consoles and the GPU portion won’t have as much wattage to with, if the console stays at ~135W and the CPU portion continues to take about 30, then the memory etc.

        So the more efficient it is, the closer to its full potential it can come within those constraints. If it’s inefficient, they have to dial it back even more.

          • Chrispy_
          • 9 months ago

          The other thing AMD [b<]*need*[/b<] efficiency for is the mobile market. AMD have nothing for the laptop dGPU market. Their ONE viable product - the mobile RX560 - barely fits into the TDP of a GTX 1060, despite underperforming a 1050, and that would be bad enough if the software/compatibility problems weren't the bigger issue. They've had pitifully low share of the laptop GPU market because perf/Watt has been half what Nvidia offers [i<]or worse[/i<] and a side effect of that is that the software ecosystem around mobile GPUs has shifted 100% to Nvidia in AMD's absense. I don't know why the laptops with RX560 offer such a terrible experience with instability and glitches, because the desktop 560s are just fine, but you don't need to be a Google-Fu master to see that AMD laptop GPU owners are a dissatisfied bunch with a laundry list of unexpected problems.

      • Ninjitsu
      • 9 months ago

      Yeah the price/performance on these things is not great at all, especially considering the lack of wide adoption of ray tracing in games.

    • freebird
    • 9 months ago

    What’s 1/2 $B between friends???

    • Neutronbeam
    • 9 months ago

    Nvidia failed the Turing test.

      • chuckula
      • 9 months ago

      Even though they rigged it to win!

      Kirk is superior to Jen-Hsun.

        • Usacomp2k3
        • 9 months ago

        Kirk? Would that be the Kobayahi Maru?

          • cynan
          • 9 months ago

          Nope. It would be the Kobayashi Maru. Which is pretty darn easy to get confused with Touring. After all, they’re practically homonyms.

            • Growler
            • 9 months ago

            [url=https://i.imgur.com/UJcGB0T.png<]Kobayashi[/url<] [url=https://i.imgur.com/DzfVJox.gif<]Maru[/url<] So the Kobayashi Maru test is whether an office worker with a dragon maid will sit in a box, no matter what size.

      • Wirko
      • 9 months ago

      And then Nvidia stock took an autonomous ride.

        • Redocbew
        • 9 months ago

        Which seems to have ended abruptly.

          • K-L-Waster
          • 9 months ago

          Nobody said which *direction* the ride was going…

      • maxxcool
      • 9 months ago

      so much win in that one πŸ™‚

    • Srsly_Bro
    • 9 months ago

    Poor sales of Turing. $1700 MSI Lightning Z 2080Ti

    I’m not sure why they are surprised by the sales performance of Turing.

      • Voldenuit
      • 9 months ago

      Poor [s<]Volta[/s<] Turing!

        • Krogoth
        • 9 months ago

        #Poor [spoiler<]Vega20[/spoiler<] Radeon VII

          • anubis44
          • 9 months ago

          Halt! Nope, you don’t get to ‘poor Radeon VII’ the card until it’s actually released.

    • K-L-Waster
    • 9 months ago

    Here’s the other shoe: apparently someone at TSMC screwed up….

    [url<]https://www.pcgamesn.com/nvidia-gpus-scrapped-tsmc-manufacturing-fault[/url<]

      • chuckula
      • 9 months ago

      We’re lucky this didn’t affect AMD’s 7nm Armada or else we’d have to hatch a bunch of Intel/Nvidia conspiracy theories.

        • Srsly_Bro
        • 9 months ago

        I think we know full well that Intel was somewhat responsible for this. 2020 Intel discrete GPU. It’s 2019 right now and tsmc that makes Nvidia GPUs had another big “accident” like when the “virus” spread around the Fab.

        Raja is the best Trojan horse money can buy.

        • Krogoth
        • 9 months ago

        AMD has already been affected by the woes. I suspect it is the main reason why Navi was abstain from CES not even a teaser.

          • chuckula
          • 9 months ago

          People tend to forget that AMD was supposed to have multiple 7nm suppliers until GloFo pulled a GloFo. The happy-fun-time PR line was that nothing is delayed because TSMC.

          Except maybe for Navi that is.

            • Sahrin
            • 9 months ago

            More like ATIC pulled an ATIC.

        • DoomGuy64
        • 9 months ago

        No, it did, or something similar happened. Adored did a leak video on this, which explains why Navi is late, and Lisa Su debuted the Radeon VII. Radeon VII was the only card they could put forward, and they didn’t really want to do it. That said, the high turing prices enabled the Radeon VII, which will be a limited supply run. It’s nothing but a stop-gap stunt until Navi can be fixed.

      • derFunkenstein
      • 9 months ago

      That may accidentally be a relief, since the issue is over-supply, and this seems to be a supply constrictor.

        • chuckula
        • 9 months ago

        It depends on the products that were affected. Even if there are too many Pascals lying around, a manufacturing failure on a different product that is in demand is still bad.

      • DragonDaddyBear
      • 9 months ago

      Didn’t that happen quite some time ago?

        • chuckula
        • 9 months ago

        Apparently this isn’t the only time there’s been a glitch like this in the last year or so.

    • chuckula
    • 9 months ago

    First Intel, now Nvidia.

    And here we thought AMD would put them out of business one at a time. But then again, when you’ve got 16 cores of dual-chiplet power, it’s easy to parallelize the bankruptcy of your failed so-called “competitors”.

    #Jan29MoProfitsMoProblems

      • maxxcool
      • 9 months ago

      #RISEOFVIA3D

    • derFunkenstein
    • 9 months ago

    Time for some price drops?

      • chuckula
      • 9 months ago

      Works every time!
      — Tomorrow’s earnings report at AMD

        • derFunkenstein
        • 9 months ago

        either you get something for all this inventory or you get nothing as it sits on a shelf, sooooo…?

          • chuckula
          • 9 months ago

          Actually, the drop in revenue is likely from Nvidia doing just that with the larger OEMs.

          • freebird
          • 9 months ago

          Sorry, this revenue miss isn’t because of too many GTX Pascal GPUs ; because Jensen Huang said so…just a few days ago…

          [url<]https://www.notebookcheck.net/Nvidia-CEO-informs-that-the-GTX-10xx-GPU-inventories-are-almost-dried-up.395871.0.html[/url<] He wouldn't lie about something like that.

          • ludi
          • 9 months ago

          Depends which option hits the balance sheet harder after the usual corporate finagling — a massive write-off of unsold inventory now, or a partial sale of discounted inventory with much less revenue followed by a smaller write-off in the future.

          • chΒ΅ck
          • 9 months ago

          they could wait and hope for a rebound in crypto too

            • NTMBK
            • 9 months ago

            HODL

      • Krogoth
      • 9 months ago

      No, it is time for rebranding existing stock. πŸ˜‰

        • chuckula
        • 9 months ago

        Nvidia has lost its rebranding mojo. Time to get back to its roots!

          • Krogoth
          • 9 months ago

          For old time’s sake, they should call the rebrands Geforce GTX 2xxx MX! πŸ˜‰

            • willmore
            • 9 months ago

            I was going to say they needed to add “Ultra” to the name, but I like where you went instead.

            • Laykun
            • 9 months ago

            So long as they even more confusingly release a GTX MX2xxx to the line.

            • DoomGuy64
            • 9 months ago

            Nah, they should rebrand their Pascal inventory as the RTX 2xxx MX. The GTX moniker is too informative. Then they can still keep prices high and sell old inventory.

            • NTMBK
            • 9 months ago

            Nah, time to bring back the Riva TNT brand!

            • DoomGuy64
            • 9 months ago

            Now that’s retro. My diamond viper v770 was a good card, rip.

      • ptsant
      • 9 months ago

      I’m wondering whether this is what motivated the “G-sync compatible” opening to owners of FreeSync monitors. I know I wasn’t thinking of an nvidia RTX card before but I am considering one now.

      Still, I am patient enough to wait a little bit more for price drops.

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