Nvidia’s shares drop 7% as video gaming market slows down

Semiconductor chip maker Nvidia Corp predicted its sales of video game chips would decline in the current quarter and surprised some analysts by highlighting new supply-chain issues resulting from China’s COVID-19 lockdowns.

Jensen Huang, the CEO of Nvidia, told reporters that Nvidia’s gaming business revenue would show a percentage decay in the mid-teens for the current quarter of 2022 compared with the previous quarter.

Huang said that overall the gaming market was slowing down. Nvidia chose to reduce what it sells into the Chinese market based on the decreased market demand. Nvidia is also taking a hit from Russia and observes a lower and slower sell-through in Europe.

Shares of Nvidia fell 6.7% in extended trading, even though the firm’s first-quarter revenues and earnings topped analyst estimates. The stocks are down nearly 40% this year in conjunction with a wilder selloff in growth stocks over concerns of aggressive interest rate increases by the Federal Reserve of the United States.

According to experts, weaker prices for graphics cards and lower discretionary spending amid high inflation are likely to pressure Nvidia’s gaming business.

A disruption in the cryptocurrency market also hurt demand for its graphics processing units, which are favored by crypto-miners of cryptocurrency. Nvidia, in a statement, said it had a 52% year-over-year decline in its OEM and other revenue categories due to a drop in revenue from processors for cryptocurrency mining.