Nvidia (NVDA): A Major Alarm For Tech Earnings (DELL)(AMD)(MSFT)

Anyone who wants to waste the money to take a sledge hammer and break apart a PC will likely find a Nvidia (NVDA) graphics chip in among the rubble.Yesterday, Nvidia warned it would miss its earnings. It would miss them by a mile. The company now expects revenue to be from $875 million to $950 million. Wall St. expected $1.1 billion for the period ending in July.

The stock promptly dropped 25%.

NVDA has been a very good investment. Over the last two years, it has outperformed both the Nasdaq and larger rival Intel (INTC). Over that period, the firm’s stock was up 160% at one point late last year. With the 25% drop it will have done no better than the broader market averages.

The critical part about the NVDA warning is that the company blamed."end-market weakness around the world, the delayed ramp of a next generation MCP, and price adjustments of our GPU products to respond to competitive products." The delay problems is specific to Nvidia. The weakness in demand and price are market issues which are likely to be the earliest signal that chip and PC sales have slowed considerably.

The blind and the optimists will say that the Nvidia numbers are an isolated case. But, it is not true. The company has too many chips in too many computers for that to be a fair assessment.

The downward revision in earnings should frighten holders of Intel, AMD (AMD), Dell (DELL) and Microsoft (MSFT). At least.

Tech was seen as a potential bright spot for Q2 earnings. That just went out the window.

Douglas A. McIntyre