Shares of Nvidia (NVDA -1.31%) were up 4.9% as of 12:29 p.m. ET on Tuesday following reports that the U.S. is planning to put further restrictions on exports of high-powered semiconductors to China. Recently, the U.S. government placed restrictions on chip exports used for artificial intelligence applications.
Tech stocks were having a good day across the board, with bond yields pulling back, making growth stocks more attractive to market traders. It was a welcome reprieve following a brutal 55% slide in Nvidia shares year to date, but the company still faces challenges in a weak PC market.
Higher inflation and interest rates are taking a toll on consumer spending. The International Data Corporation expects PC shipments to decrease by 13% in 2022, with further contraction expected in 2023. However, 2022 demand is still expected to remain higher than pre-pandemic levels.
Nvidia reported a 19% drop in revenue in the most recent quarter. PC manufacturers and retail partners are tightly managing their inventory right now, which is pressuring Nvidia's revenue. Even the red-hot gaming segment has experienced a decline in revenue, with selling prices for graphics cards plunging in recent months.
The good news is that Nvidia has plenty of cash to keep investing in the future through this downturn. The company made several announcements at the recent GTC 2022 developer conference, including the new Nvidia DRIVE Thor self-driving car computer, Omniverse cloud services for metaverse developers, and the new RTX 40 series gaming chips.
Still, it will take some time for the PC market to recover. Management expects revenue to be approximately $5.9 billion in the fiscal third quarter, down 17% year over year. Given the uncertainty with China exports, which are expected to cut $400 million in quarterly revenue, as well as plunging PC sales, investors should take management's guidance lightly at this point.