What happened
Shares of Nvidia (NVDA 5.71%) were down 4.5% as of 1:15 p.m. ET on Monday, following another analyst weighing in with a warning for investors.
Cowen analyst Matthew Ramsay stood by an outperform rating on the stock with a near-term price target of $180. The analyst sees long-term growth for the company but in the near term, he's concerned about mounting headwinds in semiconductors from a slowing PC market. This has sent Nvidia shares down 60% year to date.
So what
The U.S. government introduced new restrictions on chip exports today. The move is intended to keep China's military from using advanced computing technology produced by U.S. companies. Nvidia stands to lose $400 million in quarterly revenue. But that's just a small piece of Nvidia's problems right now.
The PC market has rapidly deteriorated in recent months. While Nvidia's advanced chips that are sold to data centers have held up well this year, the gaming segment is most susceptible to weakness in the near term. Sales of gaming chips made up a third of Nvidia's business last quarter and fell 33% year over year.
However, weakening demand in the consumer market might be carrying over to the data center segment. Nvidia's sales to hyperscale customers grew only 1% last quarter over the previous quarter. That's a significant slowdown from the fiscal-first-quarter's sequential growth of 15%.
Now what
Slowing demand for gaming chips has left Nvidia with excess inventory in the retail channel. This will likely lead to weak profitability through the end of the year, as Nvidia clears channel inventory to make room for the new RTX 40 series graphics-processing units (GPUs) for gaming.
Investors should watch how management characterizes demand for the gaming and data center segments in the next earnings report. Nvidia may need to show stability across both of these segments before the stock can move higher.
