Published - August 25, 2022 @ 2:10 PM (EET)

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Graphics chip designer Nvidia (NASDAQ:NVDA) on Wednesday issued a dismal forecast for the third quarter on the back of a weakening gaming industry, sending its shares down 4.7% in after-hours trading following the results.

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The company said that it expects revenues of about $5.9 billion for the current quarter, compared with average analyst estimates of $6.92 billion, representing a decline of 17% compared with the same period last year.

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Second-quarter revenue of $6.7 billion is up 3% year-over-year, shy of a Street estimate of $8.1 billion.  The revenue total was down 19% from the first quarter, but that didn't come as a surprise since the chip maker already warned two weeks earlier that it would significantly miss its original guidance.

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Nvidia has been among the chip companies hit hardest by consumers trimming spending in response to high inflation and rising interest rates, with its gaming segment being the main source of trouble in recent months.

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Gaming revenue in the second quarter fell 44% from the previous quarter and 33% from a year earlier to $2.04 billion, Nvidia said.  Thus, the company's operating income decreased from $2.4 billion in the comparable period to $499 million.

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Founder and CEO of Nvidia, Jensen Huang said,

"We are navigating our supply chain transitions in a challenging macro environment, and we will get through this."

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Elsewhere, Nvidia's sales of data-center chips hit a record last quarter but still fell short of expectations for what has been a promising market.  It rose 61% annually to $3.8 billion, driven by "hyperscale" customers, or otherwise, big cloud providers.

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Analysts also raised concerns it may face more bad news as former growth areas slow. Kinngai Chan, Summit Insights Group analyst said,

"We think Nvidia may see further downside from the crypto-mining and data center end markets,"

Revenue from its dedicated cryptocurrency mining chips, CPM, was "nominal" said Nvidia, contributing to a 66% annual decrease in its OEM and other categories.

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Since the beginning of the year, Nvidia stock is down over 42% so far, making it one of the worst performers on the Philadelphia Stock Exchange Semiconductor Index.

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