Nvidia warns of holiday sales decline as AI boom proves short-lived

Nvidia Corp (NVDA.O) on Wednesday warned of a decline in holiday-quarter sales, as demand for its graphics processing units (GPUs) that power artificial intelligence (AI) fizzles out after a brief boom.<br><br>Stock traders sent the shares tumbling as much as 10%, the largest decline in nearly a year, as Nvidia missed expectations in its latest quarter and painted a less promising outlook.<br><br>Nvidia, the world's largest supplier of graphics processing units (GPUs), is facing a drop in AI-related sales after a brief surge that more than doubled revenue in the July quarter. It has warned of a decline in sales in the period ending in January as demand for high-performance computing chips slows.<br><br>The company on Wednesday cut its forecast for holiday-quarter sales and said revenue in the period ending in January may decline from a year earlier. Nvidia lowered its forecast for fourth-quarter revenue by $2 billion, to $14 billion, and said it would be down 4% from a year earlier.<br><br>Nvidia was at the forefront of the AI boom last year, as its high-end graphics processing units (GPUs) that power AI were in high demand. The company's stock surged 223% last year, leading the S&P 500 index, as investors anticipated a surge in demand for AI.<br><br>But the excitement around AI that had propelled Nvidia's stock to a record high in July appears to be fading. The company's stock has fallen 28% from its peak, as investors reassess the pace of AI adoption.<br><br>Though the report was weaker than expected, some investors still believe in Nvidia's prospects for long-term growth, driven by its position as a market leader in technologies such as AI.<br><br>"Nvidia's opportunity in AI is still massive," said Kim Caughey Forrest, chief investment officer at Bokeh Capital Management. "The stock is at a point where I can buy it, but I'm not compelled to do so."<br><br>Shares of rival AMD (AMD.O) fell 3.1% in extended trading, while those of Intel Corp (INTC.O) dropped 1.3%.<br><br>A decline in demand for gaming laptops and a drop in sales of its datacentre business, which includes AI chips, contributed to the disappointing forecast, Nvidia said.<br><br>The company's datacentre segment is its largest by revenue and accounts for more than half of total sales.<br><br>"We had a good July quarter in the datacentre. We don't expect that to repeat," Nvidia Chief Executive Jensen Huang said.<br><br>The outlook overshadowed better-than-expected quarterly results and a more than doubling in profit. Fourth-quarter revenue rose 183% to $16.6 billion, beating analysts' expectations of $16.1 billion.<br><br>Net income surged more than twofold to $5.2 billion.<br><br>Nvidia's shares have climbed 64% this year, driven by the AI boom.