NVIDIA’s gaming guidance
NVIDIA’s (NVDA) gaming business has been on a roller coaster ride in the last 18 months, starting with windfall cryptocurrency gains between July 2017 and October 2018, followed by steep declines. While the impact of the crypto bubble burst has eased, overall economic demand has slowed due to US-China trade tensions. As China is a key market for NVIDIA’s gaming GPUs,[1.graphics processing units] this slowdown has raised concerns about NVIDIA’s gaming revenue.
During NVIDIA’s fiscal 2020 first-quarter earnings call, CFO Colette Kress didn’t give any annual revenue guidance despite the company’s gaming growth drivers being on track. Uncertain macro demand has clouded future sales, making it difficult for NVIDIA to give guidance.
However, NVIDIA CEO Jensen Huang eased investors’ concerns about China by stating that the nation’s gaming market is stable and vibrant with Tencent releasing new games, Epic opening new gaming stores, and more people becoming gamers. He expects the gaming market to normalize by the third quarter and demand to pick up in the fourth quarter as several blockbuster games launch in October and November.
Huang is also optimistic about RT (ray tracing), where NVIDIA has a first-mover advantage thanks to its Turing-based GeForce GPUs with RT cores. He stated that RT is the future of PC gaming and will become the standard. He supported this statement with examples of platforms such as Microsoft DXR, Unity, and Epic, movie studios such as Pixar, and publishers such as Electronic Arts adopting RTX to accelerate rendering. Even Adobe and Autodesk are bringing RT technology to their content and tools.
Competition with AMD
While NVIDIA is focusing on 12nm (nanometer) RT Turing GPUs, Advanced Micro Devices is preparing to launch 7nm Navi GPUs, which could give it a process node advantage. Huang stated that NVIDIA is improving its performance and power efficiency by focusing on architecture instead of nodes. Turing’s various other features make it a market leader. NVIDIA is on track to boost its gaming revenue through Turing GPUs, but is not quantifying the growth due to uncertain demand.