Here’s Why Nvidia’s GPU Business Could See A Slowdown In The Near Term

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Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company’s event at the 2019 Consumer Electronics Show (CES) in Las Vegas, Nevada, on Sunday, Jan. 6, 2019. (Photographer: David Paul Morris/Bloomberg)

© 2018 Bloomberg Finance LP

Nvidia (NASDAQ:NVDA) is the market leader in graphic processor units (GPUs), and the segment accounts for close to 85% of the company’s total sales. The segment sales saw strong growth in the recent years, led by higher gaming, and data center demand. However, sales could decline in fiscal 2020, amid lower data center demand, lower PC & notebook sales, as well as from the impact of macro-economic conditions in China. In this note we discuss the GPU sales growth for Nvidia, and how does Nvidia’s GPU market share compare to its rival AMD. You can look at our interactive dashboard analysis ~ Here’s Why Nvidia’s GPU Business Could See A Slowdown In Fiscal 2020 ~ for more details. In addition, you can see more of our data for Information Technology companies here.

GPU Sales Have Seen Strong Growth In The Recent Years, Led By Strong Gaming & Data Center Demand

  • Nvidia’s GPU sales have increased sharply from $5.8 billion in fiscal 2017 to $10.2 billion in fiscal 2019.
  • This can be attributed to strong demand for the company’s Volta architecture from data centers, along with strong gaming growth.

Lower PCs Sales And Enterprise Demand Will Likely Result In Revenue Decline In Fiscal 2020, While The Growth Could Return In Fiscal 2021

  • Nvidia’s GPU sales could decline from $10.2 billion in fiscal 2019 to $9.6 billion in fiscal 2020, before reviving in fiscal 2021.
  • This decline can primarily be attributed to lower PC and notebooks sales, which are expected to decline in 2019, amid a shortage of chips. In fact, the global PC shipments fell 5% in Q1 2019.
  • Also, the slowdown in the Chinese economy could impact the sales of its newly launched Turing products. Note that China accounts for roughly 25% of the company’s sales.
  • However, the situation could improve in 2021, when the company’s new Turing products could see an uptick in sales, partly led by a revival in data center demand, which has been slow of late, as some customers await the launch of the next generation of chips.

GPU Business Is Important For Nvidia, Given It Accounts For Over 85% of The Company’s Total Sales

  • Nvidia’s GPU revenues accounted for 84% of the company’s total revenues in fiscal 2017. The figure increased to 87% in fiscal 2019.
  • It should continue to grow to around 88% in fiscal 2021, in our view. This can be attributed to faster expected growth in the company’s GPU sales, as compared to its overall sales.

Nvidia Directly Competes With AMD In Discrete GPU Market, And The Share Has Fluctuated In The Recent Quarters. However, Nvidia Clearly Dominates The Market.

  • Nvidia clearly is the leader in the discrete GPUs market. The company’s share increased from 66.3% in Q4 2017 to 81.2% in Q4 2018, before falling to 77.3% in Q1 2019.
  • On the other hand, AMD lost its share to Nvidia, and it was down from 33.7% in Q4 2017 to 18.9% in Q4 2018, before seeing an uptick to 22.7% in Q1 2019.
  • The change in market share can be attributed to the launch of new models from both the players.
  • However, Nvidia could face some competition toward the end of 2019, when AMD launches its Navi architecture based cards.

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