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Will NVIDIA’s GPU Revenue Decline in Fiscal 2020?

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Nov. 20 2020, Updated 2:31 p.m. ET

NVIDIA’s product revenue

NVIDIA (NVDA) has been in a downtrend since October 2018 when the end of crypto-related sales piled up GPU (graphics processing unit) inventory in the channel. Its fiscal 2019 fourth-quarter revenue fell 24% YoY to $2.2 billion with its GPU business down 20% YoY because of the crypto-bubble burst. The company also earns revenue from Tegra SoC (system-on-chip), which is used to power game consoles, embedded devices, and autonomous vehicles.

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GPU

NVIDIA and rival Advanced Micro Devices (AMD) saw a sudden surge in consumer GPU demand in fiscal 2018 as a rise in Ethereum prices attracted many consumers to mine the digital currency. NVIDIA’s GPU revenue rose 40% in fiscal 2018. However, the crypto bubble burst in the second half of fiscal 2019. Initial sales of NVIDIA’s next-generation Turing-based RTX GPU launched in September 2018 mitigated the impact of slowing crypto-related sales in the fiscal 2019 third-quarter, which ended in October 2018.

However, NVIDIA’s GPU revenue fell 20% YoY to the pre-crypto level of $1.98 billion in the fourth quarter of fiscal 2019, which is because of a sudden increase in mid-range GPU inventory as crypto miners dumped their GPUs in the secondary market. Moreover, demand from gamers slowed due to weak economic conditions in China, NVIDIA’s major gaming market.

NVIDIA hoped to revive gaming demand with its next-generation Turing-based GeForce RTX GPUs that offer real-time ray tracing capability, but the adoption was slow, as the current games don’t support this technology. Moreover, the high price of the new GPUs discouraged gamers from buying them. The weak macro conditions in China also led to a slowdown in capital spending by cloud companies, thereby reducing NVIDIA’s data center revenue.

Tegra Processors

NVIDIA’s Tegra revenue fell 50% YoY to $225 million in the fourth quarter of fiscal 2019 as demand from the Nintendo Switch game console fell. Nintendo lowered its sales target for the year from 20 million consoles to 17 million consoles.

According to Forbes, Trefis expects NVIDIA’s fiscal 2020 GPU and Tegra revenue to fall 8.6% YoY and 5.8% YoY, respectively. This would mark the GPU segment’s first annual revenue decline in eight years.

In this series, we will look at NVIDIA’s four growth markets of gaming, data center, automotive, and professional visualization and the factors influencing its earnings in each end market.

Check out all the data we have added to our quote pages. Now you can get a valuation snapshot, earnings and revenue estimates, and historical data as well as dividend info. Take a look!

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