NVIDIA Earnings Alert: Text Analytics Shows Ongoing China Weakness, Plus Data Center Concern

NVIDIA negatively pre-announced their Q4 earnings this morning with results missing expectations by a wide margin.  The miss is made more noteworthy by the fact that it followed a weak Q3. We published an earlier article following NVIDIA's miss on November 15, which highlighted channel inventory as the primary culprit.

Please note: This in no way represents investment advice. All transcript text provided by S&P Global Market Intelligence.

Analyzing NVIDIA’s Pre-Earnings Warning

This morning’s NVIDIA press release was run through our NLP platform, resulting in 3 observations of which the last was particularly intersting:

1. Not much in the press release to soften the blow

The Amenity Score measuring the tone of the press release scored a -86 (scale -100 to +100), compared to +12 in Q3 that was already at a multi-quarter low.

NVIDIA Amenity Score

2. China weakness strikes again

As we highlighted in our Amenity Forecast Index update last week, China macro weakness is taking a bite out of outlooks across different sectors, and NVIDIA proved to be no exception:

  • NVIDIA (1/28/19):

"Deteriorating macroeconomic conditions,particularly in China, impacted consumer demand for NVIDIA gaming GPUs."

  • TE Connectivity (1/23/19):

"Our revised 2019 guidance is driven entirely by weaker markets. This is primarily driven by China with some weakness in European auto as well."

  • Union Pacific (1/24/19):

"For 2019, our Ag Product groups expect uncertainty to continue in the grain market due to foreign tariffs."

  • Las Vegas Sands (1/23/19):

"The (Macau) VIP segment will continue to be challenging, I believe."

3. Tech warning sign: NVIDIA caution in Data Center market echoes warning from Intel

Last Thursday, Intel also reported disappointing guidance, in part signaling a pause in demand from Cloud customers. This sentiment was echoed by NVIDIA this morning, and could signal broader issues in the Tech sector:

  • NVIDIA (1/28/19):

"In Datacenter, revenue also came in short of expectations. A number of deals in the company's forecast did not close in the last month of the quarter as customers shifted to a more cautious approach."

  • Intel (1/24/19):

"We expect PC-centric revenue to be up low single digits on higher modem share and data-centric revenue to be down low single digits on broad weakness in DATA Center and continued NAND pricing pressure."

  • Intel (1/24/19):

"If you look back at all the historical trends we’ve had in the cloud business, we’ve always said there’s some lumpiness to the business.  And there’s periods where people build, and then there’s periods where people consume. The signals we get from our customers is a period of build for compute is going to shift now to a period of consumption."

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Transcript text provided by S&P Global Market Intelligence.

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