Nvidia Benefits from Sustained Pandemic-Era Remote Work, Videogaming Demand -- Update
By Asa Fitch
Graphics-chip maker Nvidia Corp. is seeing no immediate letup in
pandemic-era demand in home computing, videogaming and the use of
its chips in big data centers, projecting this quarter to top the
record sales it just posted.
Nvidia, which has been among the biggest winners from the
changes in how people live their lives during the health crisis, on
Wednesday reported fiscal third quarter sales of $4.73 billion, up
by 57% from the previous year, generating $2.12 in earnings a
share. It also said it anticipated around $4.8 billion in sales in
the current quarter, surpassing Wall Street's expectations.
Chief Executive Jensen Huang has transformed Nvidia over the
past decade from a niche player in graphics-processing chips into a
major force in artificial intelligence and data-science
Nvidia's chips are in Nintendo Switch gaming consoles that have
been hot commodities during global lockdowns: almost seven million
sold in the third quarter, according to Nintendo.
"Nvidia is firing on all cylinders, achieving record revenues in
gaming, data center and overall," Mr. Huang said.
The Santa Clara, Calif.-based company's shares have more than
doubled this year, and Nvidia has surpassed Intel Corp. as the most
valuable U.S. semiconductor company.
Leveraging that rise, Mr. Huang wants to expand Nvidia's focus
further with the proposed $40 billion acquisition of U.K.-based
chip designer Arm Holdings. Arm's circuit designs are in almost all
smartphones, and its acquisition would instantly open up a new
business line for Nvidia.
Nvidia isn't alone among tech companies anticipating continued
pandemic-driven demand for remote-computing services. Microsoft
last month reported a healthy rise in sales, driven by its
cloud-computing division. Amazon.com Inc., Facebook Inc. and
Alphabet Inc.'s Google have all seen demand for digital offerings
persist as the pandemic drags on.
Nvidia has prospered also from demand for high-end computer
graphics cards that computer gamers prize. The company in September
unveiled a new card that quickly sold out, leading to frustration
from gamers and an apology from Nvidia.
Its chips are also increasingly being used in supercomputers and
data centers, used by companies and scientists to rapidly perform
huge numbers of calculations. Nvidia's graphics chips have proved
useful in other tasks as well, including artificial intelligence
calculations that underpin popular gadgets like smart speakers and
underlie product-recommendation engines.
The company's data center division sales were $1.9 billion for
the quarter, more than double the year-earlier figure. Its gaming
division also saw a jump in sales to $2.27 billion, up more than
Nvidia hasn't been immune to the effects of the pandemic on the
wider global economy, though. Its automotive division has seen
several quarters of declines, reflecting disrupted car production
and sagging sales as people put off major purchases during the
pandemic. Automotive sales were down 23% to $125 million in the
Mr. Huang's efforts to evolve and grow Nvidia would get a big
boost if regulators sign off on its Arm deal, one of a flurry of
acquisitions in the semiconductor industry this year.
The proposed transaction, though, has sparked concern in some
corners of the chip industry because it would give Nvidia control
over the designs that underlie billions of competitors' products.
Virtually all smartphones use Arm's designs, but they are also
increasingly present in server processors and personal computers,
including Apple Inc.'s new lineup of Mac computers. Chinese
authorities may also look askance at the deal, given that Nvidia is
a U.S. company and the technological competition between Washington
and Beijing has intensified in recent years.
Nvidia, which has pledged that it won't interfere with Arm's
neutrality toward its customers, hopes to receive regulatory
approval around the end of next year.
Before the Arm proposal, Nvidia had already expanded its focus
with the $7 billion acquisition of networking company Mellanox,
which closed earlier this year.
Other competitors have seized on the pandemic-fueled rise in
their share prices this year to bulk up. Advanced Micro Devices
Inc., a competitor of both Nvidia and Intel in graphics chips and
central processing units, plans to buy chip maker Xilinx Inc. in an
all-stock deal for $35 billion, the companies said in October.
Marvell Technology Group Ltd., which makes networking and data
storage chips, said the same month that it plans to buy Inphi Corp.
in a $10 billion cash-and-stock deal. In July, chip maker Analog
Devices Inc. said it would buy rival Maxim Integrated Products Inc.
in an all-stock deal valued at more than $20 billion.
Write to Asa Fitch at firstname.lastname@example.org
(END) Dow Jones Newswires
November 18, 2020 17:53 ET (22:53 GMT)
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