Why did NVIDIA issue a performance warning? Excessive product price is one of the main reasons

  According to media reports, the company's share price plummeted in early trading on Monday, as Nvidia lowered its fourth-quarter earnings forecast, saying that the game and data center division's revenues were weaker than expected.

Nvidia currently expects the company's fourth-quarter revenue to be $2.2 billion, down from the previous estimate of $2.7 billion. Before Nvidia issued a performance warning, market analysts on average expected the company's fourth quarter revenue of $2.7 billion. Nvidia said in a statement on Monday that the cut in revenue expectations is mainly due to less-than-expected revenue from gaming and data center chips. According to the plan, Nvidia will release its fourth quarter earnings report on February 14.

In response to the gaming chip business, Nvidia said its previous fourth-quarter earnings forecast "embeds a continuous decline due to redundant mid-term channel inventory after the digital cryptocurrency boom." The company said inventory reductions and impact on the company's business In general, it met management's expectations, but the deterioration of the macroeconomic situation has affected consumers' demand for NVIDIA game graphics cards, resulting in lower-than-expected graphics card shipments for certain high-end NVIDIA Turing architecture.

In other words, the high price of the GeForce RTX series of graphics cards may be one of the reasons for the lower-than-expected demand for the NVIDIA game graphics market. For example, NVIDIA has released three GeForce RTX graphics cards, including the GeForce RTX 2070, GeForce RTX 2080 and GeForce RTX 2080 Ti, priced at $499, $699 and $999, respectively. Until recently, NVIDIA launched the GeForce RTX 2060, which has a manufacturer's suggested retail price of $349.

NVIDIA acknowledges that the high price of the product is one of the reasons for the decline in demand, adding: "These products have revolutionized performance and innovation through real-time ray tracing and artificial intelligence. But some customers may delay the purchase. Because they are waiting for a lower price and further display of RTX technology in the actual game."

This statement by Nvidia is understandable and very frank. Real-time ray tracing with GeForce RTX hardware is certainly impressive, but there are very few games that currently support it. This may be because many players may actually skip the first generation of GeForce RTX graphics cards and wait for the second generation because there will be more games that support ray tracing and performance improvements.

For the data center business, Nvidia said that revenue was also lower than expected, because the customer's approach became "more cautious", resulting in "many anticipated transactions" failed to complete last month. Nvidia also said that despite the short-term resistance, the company has significantly expanded the addressable market opportunities for artificial intelligence and high-performance computing, and believes its competitive position is "complete."

NVIDIA founder and CEO Huang Renxun said: “The fourth quarter is an unusual, unusually volatile and disappointing quarter. But looking ahead, we are confident in our company strategy and growth momentum. Our business base is more than ever. More solid and obvious, NVIDIA's accelerating computing model is the best way to meet the world's never-ending computing needs.” Huang Renxun also said: “The market we are creating, including games, design, high performance. Computing, artificial intelligence, and autonomous vehicles are all important and growing, and the market size will be very large, and we have an unparalleled strategic position among them."

To be frank, companies like NVIDIA, whose performance often exceeds expectations, are surprisingly surprised by the sudden release of performance warnings to cut revenue expectations by $500 million. After Apple and Nvidia cut their performance expectations, the market is now more concerned about AMD, which will release its fourth-quarter earnings on January 29.

Affected by Nvidia's downward adjustment of revenue expectations, the company's share price plummeted by more than 17%. At the time of writing, Nvidia's share price fell by $22.99, a decrease of 14.36%, and the stock price was $137.16. In the past 52 weeks, NVIDIA's lowest share price was $124.46 and the highest share price was $292.76.