Will Nvidia Become the Next Tech Giant to Fire Employees?

Tech giant Nvidia profits were seen sliding down after a slump in the cryptocurrencies

Chips supply is harmed by the slowdown in the economies of Europe and China as well as a decline in cryptocurrencies as Nvidia heads into its quarterly results announcement following market closing. This year, Nvidia's share price has decreased by 45%. Analysts anticipate an 18% year-over-year decline in third-quarter sales.

Due to the slumps in Nvidia's share, it is anticipated that tech layoffs have affected the firm. With everything dipping, the world's largest chip supplier Nvidia firing employees will remain a concern. Strong growth in data center chip sales of tech giant Nvidia, which are anticipated to have quadrupled in the next two years amidst the growing uptake of e-commerce and cloud-based applications, has been the only saving grace. The performance of that division will be crucial to the company's results for the quarter ending in October, which analysts anticipate will show adjusted earnings per share of 71 cents.

How much the recent decline in cryptocurrency prices and, more importantly, Ethereum's September switch to a proof-of-stake method for blockchain validation from "mining," or automated math problem-solving, have hurt demand for Nvidia's processors is another important factor in the company's performance.

According to one estimate, as of May, Ethereum accounted for 97% of the mining income made by graphics processing units (GPUs) made by companies like Nvidia. Although the company's chief financial officer recognized a decline in the demand for its processors in the three months ending July 31, Nvidia argues it is impossible to quantify the role of cryptocurrency mining in that demand. The chief executive of Nvidia said on the same conference call that the demand for bitcoin mining has supported the company's product prices. Cryptocurrency miners may have accounted for up to 35% of the peak demand for graphics processing units, according to an analyst at Robert W. Baird & Co.

Nvidia provided an upgrade for one of its graphics processors without the hash-rate constraints it previously employed to make its products less desirable to miners, signaling a decline in crypto demand.

Additionally, Nvidia recently unveiled a new graphics processor designed exclusively for Chinese consumers in an effort to save $400 million in sales that have been threatened by recent U.S. export restrictions. Given the worsening in U.S.-China ties, analysts may want additional details on the company's longer-term objectives in China.

Analysts will be watching for any signs of slowing in the wake of recent cost-cutting by some of the biggest IT companies, who are Nvidia's clients, even though data-center growth has been impervious to economic challenges in recent quarters.

Leading data center Amazon Web Services said its most recent quarter had the weakest growth rate in eight years at 27.5%. Amazon (AMZN) then acknowledged it has paused recruiting while planning to lay off approximately 10,000 employees.

The owner of Facebook and Instagram, Meta Platforms (META), recently announced the layoffs of more than 11,000 workers, but Nvidia will benefit from its aggressive data center investment plans.

Despite the company's Q2 fiscal 2023 results being pre-announced by Nvidia two weeks prior, they fell short of analysts' expectations. A $1.34 billion charge, primarily for inventory discounts due to lower-than-expected demand, damaged earnings.

In the second quarter, revenue from the gaming sector, which made up slightly more than half of data center sales, fell by 44% sequentially.

In that study, Nvidia predicted third-quarter sales of $5.9 billion, give or take 2%. Gaming revenue, including cryptocurrency income, was predicted to continue declining, but data-center revenue was predicted to increase sequentially from the second quarter.

The stock recovered a post-hours dip the next day, rising 4%, but it has since fallen further. The business's Q1 fiscal 2023 results, which were released in May, exceeded expectations. The next day, the share price increased by 5.2%.

Sales of processors for data-center platforms, high-performance computing, and accelerated computing systems are all included in Nvidia's data center-sector.

As a result, it mostly relies on business clients, but the end markets for its gaming processors heavily rely on consumers who play video games and other retail customers.

Across hyper-scale, cloud, business, public sector, and edge data centers, the processors for data centers are made to accelerate computing for the heaviest workloads, such as AI, data analytics, graphics, and scientific computing. Products include software libraries and development kits, energy-efficient GPUs, data processing units (DPUs), interconnects and systems, and the CUDA programming style.