Please ensure Javascript is enabled for purposes of website accessibility

Why NVIDIA Stock Plunged Today

By Steve Symington - Updated Apr 23, 2019 at 8:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The graphics chip specialist lowered its outlook ahead of next month's quarterly report.

What happened

Shares of NVIDIA (NVDA 5.55%) were down 15.2% as of 1 p.m. EDT Monday after the graphics chip leader lowered its fourth-quarter outlook. 

NVIDIA now expects fourth-quarter revenue of $2.2 billion, plus or minus 2%, representing a 24% year-over-year decline and well below the $2.7 billion midpoint of its previous range. The company also told investors to expect adjusted gross margin to arrive at roughly 56%, plus or minus 100 basis points, down from its previous outlook for 62.5%, plus or minus 50 basis points.

Falling stock chart superimposed over columns of blue numbers

Image source: Getty Images.

So what

NVIDIA explained that revenue from both its gaming and data center segments fell short of expectations. On the former, the company elaborated that while it anticipated a sequential decline due to excess inventory following the recent cryptocurrency boom, "deteriorating macroeconomic conditions, particularly in China, impacted consumer demand for NVIDIA gaming GPUs."

On the latter, NVIDIA says some data center deals did not close as anticipated during the quarter "as customers shifted to a more cautious approach."

Founder and CEO Jensen Huang stated:

Q4 was an extraordinary, unusually turbulent, and disappointing quarter. Looking forward, we are confident in our strategies and growth drivers. The foundation of our business is strong and more evident than ever -- the accelerated computing model NVIDIA pioneered is the best path forward to serve the world's insatiable computing needs. The markets we are creating -- gaming, design, HPC, AI and autonomous vehicles -- are important, growing and will be very large. We have excellent strategic positions in all of them.

Now what

As it stands, NVIDIA will release its final fourth-quarter results after the market closes on Feb. 14. Given the guidance reduction in the meantime, however -- and with the caveat that its long-term story appears to remain firmly intact -- it's no surprise to see NVIDIA stock plunging today.

Check out the latest NVIDIA earnings call transcript.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
$171.26 (5.55%) $9.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.