Nvidia shares slump on poor fourth quarter

Nvidia's share price has crashed more than 14 percent, bringing fellow technology stocks along for the ride, after the company warned it was going to be around $500 million short on its revenue target for the fourth quarter of its 2019 financial year.

Nvidia's Turing family of graphics products have, it's fair to say, proven divisive: While the visual splendour of hardware-accelerated functionality including hybrid ray tracing and deep learning super sampling (DLSS), which use Turing's RT and Tensor cores respectively, the high price charged and relative lack of support in current games for the new features has meant that sales for Turing-based products has been significantly slower than the company expected.

'Q4 was an extraordinary, unusually turbulent, and disappointing quarter,' admits Jensen Huang, founder and chief executive of Nvidia, in a financial statement adjusting the company's forecast ahead of the end of its 2019 financial year in February. 'Looking forward, we are confident in our strategies and growth drivers. The foundation of our business is strong and more evident than ever – the accelerated computing model Nvidia pioneered is the best path forward to serve the world’s insatiable computing needs. The markets we are creating – gaming, design, HPC, AI and autonomous vehicles – are important, growing and will be very large. We have excellent strategic positions in all of them,'

In the filing, Nvidia adjusted its guidance for the fourth quarter from $2.7 billion to $2.2 billion in revenue, a $500 million shortfall, while dropping its profit margins from a healthy 62.3 percent to 55 percent both plus or minus 50 basis points. The company has blamed 'deteriorating macroeconomic conditions, particularly in China,' while also admitting that 'sales of certain high-end GPUs using Nvidia's new Turing architecture were lower than expected.'

Despite hitting positive notes in a letter to investors (PDF warning), though, Huang's reassurances don't appear to have mollified the financial markets: Nvidia's share price dropped 13.82 percent in market trading following the publication of the revised Q4 guidance, and a further 0.5 percent after market closure. The news has also affected confidence in the technology market in general, which was already suffering from aggressive market conductions: Nvidia rival AMD saw its own share price drop 7.98 percent on Nvidia's announcement, while Intel weathered the storm better with a market close at 0.7 percent down with a further 0.34 percent drop in after-hours trading.