The video game industry has grown rapidly over the decade, and it has become a new main target for many investors. Chip manufacturers are also important contributors to this market. With this factor, many investors are now investing in the chip sector in order to keep up with this trend. As a result, chip sectors are an appealing investment vehicle. However, the recent decline in chip supply is affecting the video game market. One of the suppliers is Nvidia which in turn will affect Nvidia shares as well.
Nvidia Corp (NVDA.O), a chip manufacturer, forecasted a drop in video game chip sales in the current quarter and surprised some analysts by setting out additional supply-chain difficulties coming from China’s COVID-19 restrictions.
According to Reuters, Nvidia’s gaming industry revenue might drop around 15-17% in the current quarter compared to the prior quarter.
Even though the company’s first-quarter revenues and earnings surpassed analyst expectations, Nvidia shares plummeted 6.7 percent in an extended session. The stock has dropped almost 40% this year, in line with a broader selloff in growth firms because of fears about the Federal Reserve’s rapid interest rate hikes.
As consumers consider purchases such as computers and video game consoles, concerns about inflation are spreading throughout the US economy.
Nvidia expects revenue of $8.10 billion in the second quarter, plus or minus 2%. According to Refinitiv’s IBES statistics, analysts projected $8.45 billion on average.
Nvidia Shares and Cryptocurrency
The cryptocurrency market’s downturn also harmed demand for graphics processing units, which are popular among cryptocurrency miners. Nvidia’s “OEM and other revenue” fell 52 percent year over year due to a dip in revenue from cryptocurrency mining processors, according to Kress, the company’s CFO.
Nonetheless, as more businesses move to the cloud and integrate artificial intelligence into their operations, demand from data center clients still remained high. According to Kress, this, together with automobile sales, will help counterbalance the fall in gaming. Data center revenue hit a new high of $3.75 billion in the first quarter, increasing 83% year over year. Gaming revenue reached a new high of $3.62 billion in the first quarter, increasing 31% year over year.
Revenue for the first quarter ended May 1, increased by 46% to $8.29 billion, marked as a new high. Without its products, the business earned $1.36 per share, topping analysts’ expectations of $1.29.
The video gaming sector has grown rapidly, and it is now one of the important investment vehicles. Bitcoin and crypto mining have also grown in popularity in recent years, so has the demand for chips as well. As a result, investors shouldn’t be concerned about the decline of video game sectoror as it would still continue to grow.
Read more: Cryptocurrencies