Nvidia is optimistic about the future even as gaming revenue dries up

Why this is important: Nvidia has a lot to be excited about as of late, one of which is an interesting new partnership that will see Microsoft bring Xbox and Activision games to its main competing cloud gaming service, GeForce Now. A renewed interest in AI-infused technologies is also a saving grace for the GPU maker as gaming graphics revenue dries up.

The company’s latest financial report suggests that Nvidia is doing better than Wall Street analysts expected. During the fourth quarter of last year, it earned $6.05 billion, down 21 percent from the same period in 2021.

Unsurprisingly, gaming revenue saw the most significant year-over-year decline of nearly $1.8 billion. That’s a 46 percent dive compared to Q4 2021 but an increase of 16 percent from Q3 2022. It’s also higher than the $1.6 average estimate of Wall Street analysts. Datacenter and automotive sales rose, but not enough to compensate for the big drop in consumer GPU sales and SoCs for game consoles.

However, Nvidia earned around $27 billion in revenue for the year, similar to what was achieved in FY 2022. However, net income saw a 55 percent decrease to slightly less than $4.4 billion. It’s also clear that data center revenue – up 41 percent year-over-year to $15 billion – is now the main contributor to total revenue.

Like other chipmakers, the company is facing much lower consumer demand compared to previous years, which is in line with the prevailing trend in the PC industry. The RTX 4080 saw a rocky launch full of controversy, cryptocurrency mining moved to ASICs, and overall GPU prices haven’t seen significant growth in months.

During an investor call, Nvidia CFO Colette Kress commented that lower game sales resulted from problems related to Covid-19 in China and channel inventory issues. In particular, Kress is targeting retailers that are purchasing less inventory to eliminate existing RTX 30-series stock. However, that doesn’t explain why GPU prices have barely budged since last summer.

One thing is clear. Nvidia’s future growth depends heavily on the latest AI renaissance and the race to train large language models like ChatGPT. Earlier this month, Nvidia CEO Jensen Huang said ChatGPT represents the “iPhone era” for artificial intelligence, offering a golden opportunity for his company to fill exploding demand. for AI training hardware.

Huang told investors that gaming revenue is also poised for recovery but spent most of the call hyping the possibilities of computing platforms like ChatGPT, which has reached more than 100 million active user in just two short months.

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