Nvidia isn't offering guidance for the full fiscal year because a big slowdown in data-center spending is causing 'uncertainty' in the chip market (NVDA, INTC)
Nvidia shares rallied Wednesday after it posted upbeat results, but the stock slid after the company said that, like Intel, it was still wrestling with uncertainty in the data center market.
Nvidia also said it was not going to give a full-year outlook, which one analyst said underscored the uncertainty.
CEO Jensen Huang highlighted the chip company's gains on other fronts, including gaming and AI.
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After Nvidia shares rallied Wednesday on the company's upbeat first-quarter results, the chip giant followed rival Intel's lead by painting a hazy picture of the data center market.
The fuzziness apparently was so bad, the company opted not to offer a full-year guidance, even as CEO Jensen Huang declared that the spending "pause" that has hit other chip-makers "will pass."
Nvidia's stock, which jumped after the report, slid as Huang and CFO Colette Kress offered more color on the quarter. The stock was still up about 1% after-hours, after popping more than 5% in the immediate aftermath of the report.
"We're still experiencing uncertainty as a result of the pause" in data centers," Kress told analysts. "The data center spending pause will likely persist and visibility remains low."
"Things are worse so they're pulling the full-year guide," Bernstein Research analyst Stacy Rasgon told Business Insider. "It's not complicated."
Nvidia painted the same picture Intel presented last month when the chip giant disappointed investors with a downbeat report that also pointed to a weak data center demand. Intel CEO Bob Swan pointed to "a more cautious IT spending environment."
On the call with analysts, Huang said corporate customers need more time to "digest the capacity they have."
In other words, corporate customers simply bought too many chips. Nvidia sells processors that power data center and cloud computing platforms used by big corporations and organizations. But the expected buildout of cloud platforms stalled, causing a sharp dip in demand for datacenter chips.
"They took on too much capacity," he said.
But that digestion problem will continue to hang over Nvidia's head, Rasgon said.
"I don't know if I'd call it 'bleak,' but certainly uncertain," he said. The other gains Nvidia highlighted on the call, he added, were "not enough to make up for the digestion [problem] in the rest of the business."
Huang said Nvidia was on a roll on other fronts. He highlighted Nvidia's gains in gaming and AI, where the company has emerged as a leading player.
Analyst Patrick Moorhed of Moor Insights and Strategy said noted Huang's comments on gains in key segments of the AI chip market. "He expected data centers to kick back into buying more in the back of the fiscal year," he told Business Insider. "Intel told a very similar story and I think that makes sense."
And amid speculation that the widening trade war between the US and China could hit major US tech companies, Huang says the company is actually seeing growth in a key market, gaming.
"The gaming market in China is vibrant and continues to be vibrant," he said.
Marty Wolf, president of Martinwolf, told Business Insider Huang has done a good job "repositioning company under very cloudy skies," highlighted by the data center weakness. "The market has confidence in him."
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