Nvidia's Story Has Gotten Complicated -- Heard on the Street
February 25 2021 - 6:59AM
Dow Jones News
By Dan Gallagher
Nvidia was truly in some uncharted territory with its fiscal
fourth-quarter results Wednesday, in that the chip maker is facing
concerns that even great numbers alone won't soothe.
And the numbers were great. Revenue for the quarter ended Jan.
31 soared 61% year-over-year to $5 billion, beating Wall Street's
forecast. That was thanks to booming sales of graphics processors
in both the company's videogame and data-center businesses, the
latter of which managed to surpass the record-breaking sum of the
previous quarter despite widespread expectations that giant
cloud-computing companies would ease back on the spending throttle.
Nvidia also projected total revenue of $5.3 billion for the current
quarter--about 18% above the $4.5 billion analysts were
expecting.
But Nvidia's shares ticked up only slightly after the results,
before turning down 2% later in the after-hours session. Concerns
over the global chip shortage were one factor. As one of the
world's largest "fabless" chip companies, Nvidia is at the mercy of
major producers like Taiwan Semiconductor Manufacturing and
Samsung. But production across the semiconductor supply chain has
been unable to keep up with demand, causing shortages across
industry groups. Nvidia Chief Executive Jensen Huang said on the
company's conference call Wednesday that he expects constraints to
continue this year.
Nvidia is also facing growing opposition to its proposed
acquisition of chip designer Arm Holdings, which is still awaiting
regulatory approval and is now being investigated in the U.K.
Microsoft and Google-parent Alphabet Inc.--two major buyers of
Nvidia's data-center chips--have now both voiced their opposition.
Nvidia maintained Wednesday its expected time frame of 18 months
from the deal's announcement in September to its closing, but
skepticism on Wall Street has grown. Citing the growing opposition,
Citigroup analyst Atif Malik wrote on Feb. 14 that "we lower our
confidence to 25% from 60% that the deal can close."
Even with those concerns, Nvidia should have a strong year
ahead. Wall Street expects revenue to grow 20% for the fiscal year
ending next January. And Nvidia said Wednesday it has taken steps
to keep growing demand from cryptocurrency miners from causing
shortages of its gaming chips, mainly by technical measures
designed to limit the usefulness of gaming cards for crypto mining.
This should help prevent a repeat of what happened in 2018, when a
crash in crypto prices hurt Nvidia's sales as miners dumped their
cards on the secondary market. Crypto may be less of a problem for
Nvidia this time, but production constraints and slow M&A
approvals show how much of the company's near-term story is
dominated by matters out of its control.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
February 25, 2021 06:44 ET (11:44 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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