Chip maker NVIDIA (NVDA) relies heavily on its gaming business for more than half of its revenue. However, lately, its Gaming segment has been underperforming. It’s seen revenue declines for the past three straight quarters. In the second quarter, the segment’s revenue fell 27% YoY (year-over-year). It fell 39% YoY and 45.2% YoY, respectively, in the first quarter of fiscal 2020 and the fourth quarter of fiscal 2019.
NVIDIA’s Gaming segment took a hit when cryptocurrency demand vanished in the fourth quarter of fiscal 2019. The loss of crypto demand led to excess channel inventory, which weighed on the company amid deteriorating end-market conditions. In the fourth quarter, NVIDIA also launched the expensive GeForce RTX 2060 graphics card for PC gaming. The slowdown in China also disrupted the sales of high-priced gaming graphics cards.
In the first half of fiscal 2020, NVIDIA saw a slow uptake for its next-generation Turing-based GeForce GPUs. Gaming revenue took a hit because few games supported ray tracing technology. In the second quarter, fewer shipments of graphics cards for desktop PCs and system-on-chip components for gaming systems pulled down NVIDIA’s revenue.
NVIDIA’s ray tracing technology offers users a unique and more realistic gaming experience. It boasts improved lighting effects, shadows, and colors. NVIDIA introduced its RTX tech at the Game Developers Conference in March 2018. Since then, it’s already launched various versions of its RTX GPUs (graphics processing unit) to boost the technology. The company’s launch of its GeForce RTX Super graphics cards is also expected to improve the gaming experience.
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