If we look at the last two financial years, Advanced Micro Devices (AMD) and NVIDIA Corp (NVIDIA) have posted strong results. This growth can be traced back to the strong demand for GPU and processors - The recent mining boom and global pandemic also played a huge role in the success of AMD and NVIDIA over the last 2 years.
Not a lot of people know but selling GPUs is only a fraction of its total business of NVIDIA. If we look at the 2nd quarter results, it tells us that both the margins and the growth of NVIDIA have reached a peak point. In fact, it has raised fears among many about whether NVIDIA will be able to sustain its gross margins and growth or not!
The first danger to the strong growth of NVIDIA is that the PC market is shrinking. From affordable smartphones to supply disruption to COVID-19, a lot of factors are at play. That's why the famous tech company Intel has also expressed its corrects for the financial year 2022.
According to a famous consulting company, the PC market saw a decline of almost 12.6% during the 2nd quarter of 2022. As a result, GPU and CPU markets such as NVIDIA and Intel may feel the heat going forward.
In fact, the results from the 2nd quarter already show a slowdown in the NVIDIA growth. Although the earnings were preliminary, it still tells us a lot about the financial conditions and operations of the NVIDIA company.
Overall, the company announced an almost 17% drop in its revenue. Going forward, this could lead to pricing weakness for the GPU products of NVIDIA. On top of that, the declining PC market may make things even more troubling for the company.
One thing which could push more growth in NVIDIA is a drop in inflation so that the PC demand can rise once again.