AMD's stock tumbles after bearish analyst call, to pace broad sector weakness

Published: Oct 19, 2018 2:15 p.m. ET

Shares of Advanced Micro Devices Inc. tumbled 7.3% in afternoon trade, enough to pace the decliners in the semiconductor sector, after bearish note on the company from New Street Research and recent downbeat reports on the sector.

On Friday, New Street analyst Pierre Ferragu initiated coverage of AMD with a sell rating and stock price target of $18, which was 27% below current levels, saying he sees a "hard stop" in momentum around the corner. "Our detailed review of AMD's architecture and actual needs of the server and PC markets, combined with our analysis of competitive dynamics between Intel and AMD nevertheless suggest the party might be over soon," Ferragu wrote in a note to clients.

AMD's stock was the biggest decliner in the PHLX Semiconductor Index which fell 1.3% with 25 of 30 components losing ground. AMD's stock has plunged 20% so far this month, while the SOX has lost 11% and the S&P 500 has slipped 5.1%.

Morgan Stanley said in a note Thursday that it expects broad-based lowered fourth-quarter guidance when chip makers report third-quarter results, driven by "pronounced weakness" in autos and a slowing in industrial. Goldman Sachs said Thursday it expects a cyclical correction in the sector amid weaker data points in the industrial end markets.

Advanced Micro Devices (AMD) Stock Remains Attractive as Long-Term Confidence Increases, Says Top Analyst

October 19, 2018, 11:59 AM EDT

Advanced Micro Devices (AMD) is getting yet another vote of confidence, as Cowen’s top analyst Matt Ramsay raised his target price on AMD from $30 to $33 due to Intel’s (INTC) perceived issues with its 14nm chip shortages. Furthermore, the analyst believes AMD’s improved 7nm products are positioned to pounce on the consequences of Intel’s recent customer missteps into 2H19/20. All in all, the analyst rates AMD stock an Outperform.

Ramsay commented, “We are raising our 2H18 and 1Q19 estimates as we believe AMD is poised to benefit in portions of the PC market due to Intel’s 14nm capacity constraints. We believe this upside in terms of Ryzen Mobile notebook volumes in particular should be enough to offset channel inventory sell-in headwinds in the low/mid tier GPU market, and tough Y/Y crypto comps for Q4/Q1 (headwinds we believe are temporary). In fact, our work indicates Intel is prioritizing Apple modem and cloud-focused server silicon supply, leaving some mid-tier server OEMs and essentially all low- and mid-tier notebook OEMs short of x86 CPU supply for holiday and Chinese New Year products.”

“This is all taking place as AMD ramps a more complete and competitive lineup of desktop and notebook CPUs on 12nm at GF, and anticipation of a MUCH stronger lineup in 2019 on 7nm silicon from TSMC (particularly in notebook where TSMC’s low-power, high-frequency silicon expertise could prove transformative to AMD’s roadmap),” the analyst added.

Earnings: Of the 28 analysts surveyed by FactSet, AMD on average is expected to post adjusted earnings of 12 cents a share, down from the 13 cents a share expected at the beginning of the quarter. AMD reported earnings of 10 cents a share in the year-ago period. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, calls for earnings of 15 cents a share.

Revenue: Wall Street expects revenue of $1.7 billion from AMD, according to 27 analysts polled by FactSet. That’s down from the $1.76 billion forecast at the beginning of the quarter. AMD, which reported revenue of $1.64 billion in the year-ago period, predicted revenue of $1.65 billion to $1.75 billion for the third quarter. Estimize expects revenue of $1.75 billion.

For the quarter, analysts expect $1.05 billion in computing and graphics sales, or a gain of 29% from the year ago period, and a 21% decline in enterprise embedded and semi-custom sales to $653 million.

What analysts are saying

Of the 33 analysts who cover AMD, 13 have buy or overweight ratings, 15 have hold ratings and five have sell or underweight ratings, with an average price target of $25.25.

Cowen analyst Matthew Ramsay, who has an outperform rating and a $33 price target on AMD, said AMD should “partially fill the void” left by Intel 14nm central processing unit, or CPU, shortages during the fourth and first quarter and use 7nm products to capture market share long term into the latter half of 2019 and in 2020.

Ramsay said:
Ramsay believes AMD is “deeply engaged” with five out of seven datacenter players. Those include Tencent which already made an announcement, Amazon and Google which Ramsay says he expects announcements from soon, and Microsoft and Baidu.

Stifel analyst Kevin Cassidy, who has a buy rating on AMD and a $38 price target, said he expects AMD to use it conference call to report on 7nm graphics processing unit, or GPU, and CPU products, an expansion of gross margins, and the opportunity for increased market share in the PC market.

“We expect AMD to continue to gain market share through 2019 as the chips will be fully qualified while the company will also benefit from the ramp of its second generation chips, the 7nm ‘Rome’,” Cassidy said. “AMD plans to launch its 7nm GPU in 4Q18 that will specifically target the datacenter market which we expect will be followed by a PC model in 2019.”

Today, we are announcing the general availability of "Compute Standard E2 platform" which is the first addition to the E series. The Compute Standard E2 platform will be available in both Bare Metal and also 1 core, 2 core, 4 core and 8 core VM shapes. With the launch of Compute Standard E2 instances, Oracle Cloud Infrastructure becomes the first public cloud to have a generally available AMD EPYC processor-based compute instance. With 64 cores per server, Oracle has the largest core count instance available in production in the public cloud. With 33 percent more memory channels than comparable x86 instances, this new instance provides more than 269 Gb/s memory bandwidth, the highest recorded by any instance in the public cloud. Additionally, AMD EPYC processors are not affected by Meltdown and Foreshadow security vulnerabilities.

You get all of this for $0.03 per core hour, which is 66 percent less than general purpose instances offered by other clouds, 53 percent lower than Oracle's other compute instances, and is the lowest price offered by any non-burstable compute instance in the public cloud.

“We delivered our fifth straight quarter of year-over-year revenue and net income growth driven largely by the accelerated adoption of our Ryzen, EPYC and datacenter graphics products,” said Dr. Lisa Su, AMD president and CEO. “Client and server processor sales increased significantly although graphics channel sales were lower in the quarter. Looking forward, we believe we are well positioned for further market share gains as we continue making significant progress towards our long-term financial targets.”

Q3 2018 Results
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• Revenue was $1.65 billion, up 4 percent year-over-year and down 6 percent quarter-over-quarter. The year-over-year increase was driven by higher client revenue in the Computing and Graphics business segment. The sequential decrease was driven by lower graphics revenue in the Computing and Graphics business segment. Third quarter revenue included IP-related revenue, of which $86 million was related to our THATIC joint venture. Third quarter 2017 revenue also included IP-related revenue.
• Gross margin grew to 40 percent, up 4 percentage points year-over-year, primarily driven by the ramp of new products, including RyzenTM and EPYCTM processors. On a sequential basis, gross margin was up 3 percentage points primarily driven by IP-related revenue and the ramp of new products. Excluding IP-related revenue and memory and inventory related adjustments, gross margin would have been 2 percentage points lower.
• On a GAAP basis, operating income was $150 million compared to operating income of $119 million a year ago and $153 million in the prior quarter.
• Net income was $102 million compared to net income of $61 million a year ago and $116 million in the prior quarter. Diluted earnings per share was $0.09, compared to diluted earnings per share of $0.06 a year ago and $0.11 in the prior quarter.
• On a non-GAAP basis, operating income was $186 million compared to operating income of $148 million a year ago and $186 million in the prior quarter.
• Non-GAAP net income was $150 million compared to net income of $100 million a year ago and $156 million in the prior quarter. Non-GAAP diluted earnings per share was $0.13, compared to diluted earnings per share of $0.09 a year ago and $0.14 in the prior quarter.
• Cash, cash equivalents and marketable securities were $1.06 billion at the end of the quarter.
• Cash flow from operating activities was $95 million as compared to $66 million a year ago. Free cash flow was $62 million, up from $32 million a year ago.

Quarterly Financial Segment Summary
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• Computing and Graphics segment revenue was $938 million, up 12 percent year-over-year and down 14 percent quarter-over-quarter. Year-over-year revenue growth was primarily driven by strong sales of Ryzen desktop and mobile products, partially offset by lower graphics revenue. Blockchain-related GPU sales in the third quarter were negligible. In the third quarter of 2017, blockchain-related GPU sales were approximately high single digit percentage of total AMD revenue. The quarter-over-quarter decline was due to significantly lower graphics revenue driven by high channel inventory, partially offset by higher Ryzen processor revenue.
  • Client processor average selling price (ASP) was higher year-over-year and quarter-over-quarter primarily due to higher desktop and mobile processor ASP.
  • GPU ASP decreased year-over-year and quarter-over-quarter due to lower GPU channel sales.
  • Operating income was $100 million, compared to operating income of $73 million a year ago and operating income of $117 million in the prior quarter. The year-over-year operating income improvement was primarily driven by a richer client product mix and IP-related revenue, partially offset by lower graphics revenue. The quarter-over-quarter operating income decline was primarily due to lower graphics revenue.

• Enterprise, Embedded and Semi-Custom segment revenue was $715 million, down 5 percent year-over-year and up 7 percent quarter-over-quarter. The year-over-year revenue decrease was driven primarily by lower semi-custom product and IP-related revenue, partially offset by higher server sales. The quarter-over-quarter increase was primarily driven by higher semi-custom, IP-related and server revenue.
  • Operating income was $86 million, compared to operating income of $74 million a year ago and $69 million in the prior quarter. The year-over-year increase was primarily due to a richer server and semi-custom product mix. The quarter-over-quarter increase was primarily due to IP-related and server revenue.

Current Outlook

For the fourth quarter of 2018, AMD expects revenue to be approximately $1.45 billion, plus or minus $50 million, an increase of approximately 8 percent year-over-year, and non-GAAP gross margin to increase to approximately 41 percent, driven by sales growth of Ryzen, EPYC and datacenter GPU processor sales. For comparative purposes, Q4 2017 revenue was $1.34 billion, adjusted for the ASC 606 revenue accounting standard, and included blockchain-related GPU sales of approximately low double-digit percent of overall AMD revenue.

Advanced Micro Devices Tumbles in After-Hours Trading

Oct. 24, 2018 8:53 p.m. ET

Shares in Advanced Micro Devices Inc. plunged about 22% in post-market trading Wednesday after the computer-chip maker warned about weakness in its graphics business and a slowdown in demand on its blockchain offerings.

Revenue in the Sunnyvale, Calif.-based company’s graphics segment fell 6% to $938 million from $1.09 billion from the previous quarter.

During a conference call with analysts, Chief Executive Lisa Su said the softness in its graphics business could lead to a flat fourth quarter and a slow start to 2019. The CEO said the drop-off in its graphics segment was larger than expected, but Ms. Su was hopeful some of the company’s new products could offset any future declines in its graphics business.

“We had expected the segment to be down, but we probably expected it to be down about $50 million or so,” Ms. Su said on the call. “We had very strong demand in the first half of this year and as the supply chain built up, we’re just seeing some excess inventory that needs to be worked through right now.”

Graphics card demand for technology used in blockchain offerings was strong earlier in the year, leading Advanced Micro Devices to become one of the best performing stocks in the S&P 500. But the company said Wednesday that demand has slowed.

Overall, the company reported a profit of $102 million, or 9 cents a share, compared with $71 million, or 6 cents a share, it earned in the same period a year ago. On an adjusted basis, earnings rose to 13 cents a share, compared with the 12 cents a share analysts polled by Refinitiv anticipated. Total revenue rose 4% to $1.65 billion, but analysts expected $1.7 billion.

AMD’s Gain Before Pain

Chip maker’s data center potential remains strong, but fading crypto business hurts first

Oct. 24, 2018 8:59 p.m. ET

Shares of the chip maker were crushed following its third-quarter results. Revenue for the period grew 4% year over year, which was a notable slowdown from the double-digit gains over the last five periods and short of the $1.7 billion that analysts had been expecting. AMD’s forecast of $1.45 billion in sales for the fourth quarter was also about 9% shy of analysts’ estimates.

The main culprit was fading sales of graphics processors to cryptocurrency miners, who have been cooling their activity significantly as the value of those currencies has plunged this year. AMD had already warned these sales would be weak for the quarter, and rival Nvidia later took crypto demand fully out of its own forecasts. AMD fell 9% in the regular session and plunged another 22% after hours following the report.

That effectively puts AMD back to where it was in July—before it became clear that Intel’s troubles with its next manufacturing process would provide AMD a valuable opportunity to gain share in the lucrative market for data center processors. That opportunity still exists; AMD said on its call Wednesday that it expects to gain double-digit market share in data centers next year when its new chips start shipping. Intel’s current manufacturing constraints also appear to be helping AMD’s sales of PC processors. The company noted that operating margins in its graphics and compute division rose to nearly 10.7% in the recent quarter compared with 8.7% in the same period last year due to strong demand for its Ryzen chips in desktop and laptops.

Investors, however, haven’t been buying AMD for exposure to the slow-growth PC business. The potential for data-center gains surprised investors and sparked a rally on AMD’s stock that effectively doubled the company’s market value in just two months.

AMD is still making the right bets. Wednesday selloff provides an opportunity for investors to get in on those bets—provided they have the patience to allow those bets to pay off.

Intel soars on big earnings beat

Intel stock rose as much as 6 percent Thursday after the company reported better-than-expected third-quarter earnings. The company will hold a conference call to discuss the results with analysts at 5 p.m. Eastern time.

Here are the key numbers:
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• Earnings: $1.40 per share, excluding certain items, vs. $1.15 per share expected by analysts, according to Refinitiv.
• Revenue: $19.16 billion, vs. $18.11 billion as expected by analysts, according to Reuters.

Intel's revenue was up 19 percent year over year, according to a statement. That's stronger from the 2 percent growth in the third quarter of 2017.

Looking ahead, Intel forecasted 1.22 in earnings per share, excluding certain items, on $19 billion in revenue in the fourth quarter. Analysts were expecting fourth-quarter earnings of $1.09 per share, excluding certain items, on $18.39 billion in revenue, according to Refinitiv.

Intel raised its guidance for the full year to $4.53 in earnings per share, excluding certain items, on $71.2 billion in revenue. Analysts were expecting $4.16 in earnings per share, excluding certain items, on $69.54 billion in revenue, according to Refinitiv.

Intel's biggest business segment, the Client Computing Group, reached $10.23 billion in revenue in the second quarter, easily surpassing the FactSet analyst consensus of $9.33 billion.

The second-largest Intel segment, the Data Center Group, generated $6.14 billion in revenue, which is above the $5.89 billion estimate.

And Intel's Non-Volatile Memory Solutions Group came in under the $1.14 billion revenue estimate, producing $1.08 billion in revenue.

The company has been delayed in deploying technology for future generations of chips, though it's moving forward on 10-nanometer chips, which are expected to be more power efficient than past processors.

"We are making good progress on 10nm," the company said in a tweet earlier this week. "Yields are improving consistent with the timeline we shared during our last earnings report."

The status of the 10-nanometer process will likely be of central importance to analysts on the call, along with the CEO search, the opportunity for growth in the data center market and gross margin potential in 2019, analysts Stacy Rasgon and James Williams at Bernstein Research wrote in a note to clients on Monday.

This is breaking news. Please check back for updates.

SEATTLE, Oct. 30, 2018 (GLOBE NEWSWIRE) -- Global supercomputer leader Cray Inc. (Nasdaq:CRAY) today unveiled its new, revolutionary supercomputing system code-named “Shasta™.” The system will be showcased next month at the 30th anniversary of the Supercomputing (SC) conference in Dallas, Texas, known as SC18. Shasta is an entirely new design and is set to be the technology that underpins the next era of supercomputing, characterized by exascale performance capability, new data-centric workloads, and an explosion of processor architectures. With sweeping hardware and software innovations, Shasta incorporates next-generation Cray system software to enable modularity and extensibility, a new Cray-designed system interconnect, unparalleled flexibility in processing choice within a system, and a software environment that provides for seamless scalability. The U.S. Department of Energy (DOE) also announced today that NERSC, the National Energy Research Scientific Computing Center, has chosen a Cray “Shasta” supercomputer for its NERSC-9 system, named “Perlmutter,” in 2020. The program contract is valued at $146 million, one of the largest in Cray’s history, and will feature a Shasta system with Cray® ClusterStor™ storage.

Microsoft and Baidu next?

AMD Chief Lisa Su Aims to Take Massive Market Share From Intel

Nov. 7, 2018 3:06 p.m. ET

Advanced Micro Devices (AMD) CEO Lisa Su is plotting a course in which she sees the chipmaker taking significant share from Intel in the server chip market.

On Tuesday, AMD unveiled new details about its 7-nanometer (nm) next-generation server chip, called “Rome”, at a product event. The chip is slated to launch next year.

AMD has already projected it will achieve a “mid-single digit” share of the server chip market with its current offerings by year-end versus the less than 1% share it had last year. But Su told Barron’s in a phone interview Wednesday the company’s longer-term aspirations are much larger.

When asked if AMD will be able to exceed the historic high of 25% of the server chip market it had in 2006, Su replied, “My vision is to exceed that market share … Yes, AMD’s previous peak was 25% to 26% share, but our current product map is better than the Opteron [the 2006 chip] days.”

AMD stock has soared more than 100% this year on anticipation it will take more business from Intel based on its increasingly competitive chip technology.

Intel (INTC) has suffered from repeated delays in moving to 10nm chip-manufacturing technology from 14nm today, which it now projects will be available in the second half of 2019. But even if Intel hits that forecast, AMD will likely have an advantage as it expects to produce 7nm Rome chips by then.

“We feel really good about where the performance of Rome [will be] relative to the competition,” Su said. “We expect meaningful revenue in 2019 from Rome [although] second-half weighted.”

She cited how one Rome chip outperformed two of Intel’s current 8180 server chips, according to AMD benchmarks.

Intel currently dominates the high-profit-margin data-center business, where it sells server chips to cloud computing providers and corporations. Analysts estimate that Intel’s data-center group will generate $23.2 billion in sales and $11.4 billion in operating profit in 2018, according to FactSet.

In comparison, the Wall Street consensus for AMD’s total 2018 sales is just $6.5 billion, so a significant increase in AMD’s server chip business would be a financial boon for it.

Nvidia earnings: The Turing test has arrived

Published: Nov 13, 2018 2:16 p.m. ET

Nvidia launched new products last quarter with graphics-processing units based on its new Turing architecture, which will replace the most financially lucrative generation GPUs of the company’s long history, known as Pascal. When the company releases fiscal third-quarter earnings after the market closes Thursday, it will be the first glimpse at how these products are selling early in their life — a Turing test, if you will.

The debate in the financial community about Turing suggests that early returns will not be huge, however. Nvidia’s big selling point for Turing-based gaming focuses on real-time ray tracing, a significant advancement that allows game designers to offer more realistic images. The issue is that games will have to be designed with Nvidia products to take advantage of the technology, which means the “killer app” on these new gaming cards likely won’t be widely available until Nvidia is able to sell its technology to designers in large numbers, and those designers are able to develop and release more games using it.

Morgan Stanley analyst Joseph Moore said last week the adoption of the Turing family of chips will likely be a “slow burn,” and cut his price target on Nvidia stock while maintaining an overweight rating.

“The ability to do ray tracing — a technology that has been associated with rendering of Pixar animated films that render a frame every few minutes — in real time takes us a large step closer to photorealism in games,” Moore wrote. “It is a big deal — but writing software to take advantage of it will take time, and implementation for early adopters seems underwhelming per press reports.”

Nvidia seems to understand the need to get the technology into designers’ hands early in the process, as the company announced cards for professional designers (and Hollywood) a week before showing off the consumer cards. The first Turing-based gaming cards will show up in Nvidia’s largest revenue segment, gaming, but the cards for designers will show up in Nvidia’s “professional visualization” segment. While gaming cards launched in the third quarter, the Quadro RTX cards for designers will not launch until the current quarter, so investors will want to watch that segment into the future to gauge adoption.

The first Turing-based cards available to gamers are also more expensive than their predecessors, and Nvidia could face a squeeze from gamers sticking to Pascal-based cards and finding them on the secondary market. Chief Executive Jensen Huang noted last quarter that the cryptocurrency-mining market — which was hot in 2017 and the beginning of this year with miners using GPUs to collect currencies like ether — has dried up. If those miners decide to sell the cards they used in their mining rigs, gamers could buy those instead of new Turing cards, so expect commentary on the secondary market and mining in the scheduled conference call.

Earnings: Of 24 analysts surveyed, Nvidia on average is expected to post GAAP earnings of $1.71 a share, down from $1.81 a share that was expected at the beginning of the quarter, according to FactSet. On a fully adjusted basis, which strips out stock compensation, analysts on average expect $1.93 a share. Estimize calls for adjusted earnings of $1.93 a share.

Revenue: Wall Street expects revenue of $3.24 billion from Nvidia, according to 30 analysts polled by FactSet. That’s down from the $3.33 billion forecast at the beginning of the quarter. Nvidia predicted revenue of $3.19 billion to $3.32 billion. Estimize expects revenue of $3.27 billion.

Nvidia’s revenue is broken down into five segments: Gaming, data center, professional visualization, automotive and “OEM & IP,” or original equipment manufacturers and intellectual property. Analysts on average expect third-quarter gaming revenue of $1.91 billion, data-center sales of $819 million, professional visualization sales of $282 million, auto sales of $160 million and OEM & IP revenue of $116 million.

On Tuesday, Susquehanna Financial Group analyst Christopher Rolland upgraded Nvidia to a positive rating from neutral but cut his price target to $230 from $250, stating he thought the chances were high the company’s results fall short of the Wall Street consensus on Thursday.

The price cut comes from hear-term headwinds like clearing the graphics card channel but the upgrade comes from long-term tailwinds like opportunities in 7 nanometer GPUs and the growing AI market.

“We believe the market for A.I. inference could grow to $4 billion by 2022 and $6.5 billion by 2025,” Rolland said.

SANTA CLARA, Calif., Nov. 15, 2018 NVIDIA (NASDAQ: NVDA) today reported revenue for the third quarter ended Oct. 28, 2018, of $3.18 billion, up 21 percent from $2.64 billion a year earlier, and up 2 percent from $3.12 billion in the previous quarter.

GAAP earnings per diluted share for the quarter were $1.97, up 48 percent from $1.33 a year ago and up 12 percent from $1.76 in the previous quarter. Non-GAAP earnings per diluted share were $1.84, up 38 percent from $1.33 a year earlier and down 5 percent from $1.94 in the previous quarter.

Applied Materials' forecast misses estimates, shares drop

November 15, 2018

(Reuters) - Applied Materials, whose results are seen as a barometer for the chip industry, said sales in its semiconductor business fell about 5 percent to $2.31 billion in the fourth quarter, missing research firm FactSet’s estimates of $2.42 billion.

Sales from the company’s display business — which makes flat panel displays for televisions, PCs and smartphones — rose nearly 4 percent to $702 million, beating estimates of $690.6 million.

Excluding items, the company earned 97 cents per share, while total net sales rose 1.1 percent to $4.01 billion.

Analysts on average had expected the company to earn 97 cents per share on revenue of $4 billion, according to Refinitiv data.

Net income fell to $876 million, or 89 cents per share, in the fourth quarter ended Oct. 28, from $982 million, or 91 cents per share, a year earlier.

Applied Materials Gives Weak Forecasts, Cites Market Headwinds

November 15, 2018

Applied Materials Inc., the biggest maker of equipment used to manufacture semiconductors, gave weak forecasts that indicate the chip industry is holding off on expansion plans in the face of a murky outlook for electronics demand. The stock fell in extended trading.

The company is a bellwether for the industry because chip makers must buy gear from Applied Materials well ahead of new manufacturing plans. When the industry is cutting back, Applied Materials is often one of the first to feel those chills, too.

The increasing difficulty of manufacturing chips and the addition of electronic functions in everything from cars to fridges fueled a four-year boom. But there are now signs this could be followed by another cyclical downturn. After hitting a record earlier this year, Applied Materials shares have dropped more than 40 percent.

Key Insights
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• Applied projected first-quarter sales of $3.56 billion to $3.86 billion, the company said Thursday in a statement. That compares with an average analyst estimate of $3.96 billion, according to data compiled by Bloomberg.
• Adjusted earnings per share will be 75 cents to 83 cents, compared with an average estimate of 92 cents.
• Chief Executive Officer Gary Dickerson said in a statement that "near-term market headwinds remain."

Know More
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• Historically chip-equipment makers have had some of the most volatile earnings in the technology industry. Their machines, which cost tens of millions of dollars each, take months to make and even longer to install. So when a semiconductor company wants to cut costs quickly, a relatively easy option is to cancel or delay Applied Materials orders.
• Applied’s forecast indicates sales will decline year over year for the first time since 2016. The fourth quarter was the first time revenue hasn’t grown by double-digit percentages in 10 quarters.

Nvidia has a Pascal problem, and its stock is plunging after earnings

“Gaming revenue was short of our expectations, and our fourth-quarter outlook is impacted by excess channel inventory of midrange Pascal products,” Nvidia Chief Financial Officer Colette Kress said in a statement. “We believe this is a near-term issue that will be corrected in one to two quarters, and remain confident in our competitive position and market opportunities.”

Gaming revenue rose 13% from a year ago to $1.76 billion, but that was way below the Wall Street consensus of $1.91 billion.

On a conference call, Kress said that the quarter “included a $57 million charge for prior architecture components and chips following the sharp falloff of crypto mining demand.”

Ever since last year’s peak in cryptocurrencies like bitcoin, more and more miners have sold off their mining rigs, meaning there has been a flood of second-hand Pascal gaming chips and gaming chips from companies like Advanced Micro Devices Inc. on the market. On the call, Nvidia founder and CEO Jensen Huang said it was not alone in the inventory clearance problem.

“The amount of inventory is not just us, it’s also the other brands,” Huang said. AMD shares were down 6.4% after hours, following a 3.3% gain in the regular session to close at $21.49.

Nvidia explained that it is holding on to too many of its older-generation Pascal chips — Pascal is the chip architecture that is being replaced by Nvidia’s recently released Turing chip architecture for professionals and gamers.

That wreaked havoc with Nvidia’s forecast for the fourth quarter as it seeks to work down that inventory. The company called for revenue of $2.65 billion to $2.75 billion, while analysts on average had expected revenue of $3.4 billion. While clearing out old inventory was not a complete surprise, the magnitude of it was.

“We were surprised obviously,” Huang said on the call. “I mean we’re surprised by it as anybody else. The crypto hangover lasted longer than we expected. Prices started to drift down and we expected to come down much more quickly than it did.”