Nvidia Faces $100 Million Coronavirus Hit

The coronavirus outbreak in China will potentially Nvidia's disrupt sales and production.

On Thursday, Nvidia lowered its revenue projections for this year’s first quarter by $100 million, citing the coronavirus. The illness continues to spread in China, which is home to much of the world’s electronics manufacturing, and also a major market for Nvidia’s graphics cards.

“While it is still early and the ultimate effect is difficult to estimate, we have reduced our Q1 revenue outlook by $100 million to account for the potential impact,” Nvidia Chief Financial Officer Colette Kress said during the earning’s call.

According to Kress, China makes up about 30 percent of Nvidia’s total gaming business. The country is also a big buyer of graphics cards to power local data centers and supercomputers. However, to stop the coronavirus from spreading, the Chinese government has been instituting quarantines and travel restrictions, which have been preventing both consumers and commercial shipments from freely moving about.  

“The $100 million also reflects what may be supply challenges,” she added. Although Kress didn’t elaborate, the company sources it’s manufacturing to numerous suppliers, such as TSMC and Foxconn, which have factories in Taiwan and mainland China.

Nvidia isn’t the only company preparing for disruptions from the coronavirus. Many other vendors are bracing for some impact, given China’s central role in the world’s electronics supply chain. Last week, both Nintendo and Facebook reported the outbreak would result in shipment delays for their gaming products, including the Nintendo Switch and Facebook’s Oculus VR units.

Despite the potential impact from the coronavirus, Nvidia still expects $3 billion in revenue this quarter, a 36 percent year-over-year increase. The company is basing the projection on strong demand for the company’s RTX graphics cards, the starting price of which were recently reduced to $299.

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“So it's now at the sweet spot of gaming. And so RTX is doing fantastic. The sell-through is fantastic all over the world,” Nvidia CEO Jensen Huang said during the earnings call.

Another factor that’s been boosting revenue is increased sales of laptops built with Nvidia graphics cards. “Our notebook business as Colette (Kress) mentioned earlier, has seen double-digit growth for eight consecutive quarters and this is unquestionably a new gaming category,” Huang added.

The company is also getting a revenue boost from the Nintendo Switch, which uses Nvidia’s “Tegra” graphics card processor. Sales of the Nintendo console recently reached 52 million units.  

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