- AMD shares were down 6.5% Monday after Nvidia CEO Jensen Huang said declining macroeconomic conditions, particularly in China, impacted demand his company’s gaming graphics processing units.
- AMD is set to report its fourth-quarter results after Tuesday’s closing bell.
- At the beginning of the year, an analyst told Markets Insider that AMD is facing a ‘pretty sizable’ earnings mess.
- Watch AMD trade live.
“As we worked through Q4, the global economy decelerated sharply, particularly in China, affecting consumer demand for NVIDIA gaming GPUs,” Nvidia founder and CEO Jensen Huang said in a filing with the Securities and Exchange Commission.
“Also, with initial shipments of new high-end RTX GPUs selling above MSRP, some customers may have delayed their purchase while waiting for lower price points and further demonstrations of RTX technology in actual games.”
Nvidia cut its revenue guidance to $US2.2 billion down from its previous expectation of $US2.7 billion, sending shares down 18%.
In the wake of the warning, AMD – one of Nvidia’s biggest competitors in graphics processing units – is also under pressure, one day ahead of its earnings.
According to Rolland, the 2017 crypto boom led chip giants to overproduce graphic processing units for miners of digital coins, causing an inventory problem when they crashed in 2018 – and AMD has no place to hide.
In May, AMD warned its crypto businesses would fall to near zero as the boom turned into a bust. In October, AMD’s results fell short of Wall Street estimates, but the chipmaker didn’t mention the impact from crypto. A month later, rival Nvidia posted brutal third-quarter earnings, largely attributing underwhelming financial results to its overproduction of GPUs for crypto mining.
“Remember that Nvidia is a month further in the reporting process versus AMD,” Rolland told Markets Insider. “Nvidia has already confessed fully to the amount of inventory that’s out there. AMD has only half confessed.”
AMD is set to report fourth-quarter results Tuesday, with analysts surveyed by Bloomberg expecting adjusted earnings of $US0.08 a share on revenue of $US1.45 billion.
AMD was up 52% in the past year.