Artificial intelligence and graphics chipmaker Nvidia reported its 2020 Q4 earnings after the market close today (fiscal quarter ends on January 26th, 2020).  The company announced revenues of $3.11 billion for the quarter, a jump of 41 percent from the year-ago and a 3 percent increase from the third quarter.   The stock is trading 6.5 percent higher in after-hours trading.

Nevertheless, the full-year revealed a more complicated picture for the company. Revenue was down slightly for the 2020 fiscal year compared to 2019, and operating expenses, operating income, net income, and diluted earnings all headed the wrong way, in some cases by more than 30 percent.

Tough Year For Semi Sector

Nvidia’s problems in 2019 weren’t unique as last year was dismal for the chip industry as a whole. The industry’s total sales declined the fastest in more than a decade from a number of factors, including less demand in some parts of the market, oversupply in other parts of the market (driving down prices and thus sales revenue), and trade tensions between the U.S., China, South Korea, and Japan.

Even though the Semiconductor Industry Association recently predicted a 12.8% decline in sales for the year, which would be the worst decline since the economic nadir of 2009, semi stocks were up big.  The PHLX Semiconductor Index SOX, +0.08%  posted 60.1 percent in 2019, its strongest performance since 2009.

Source:  MarketWatch

Why The Divergence?

Analysts say that 2018’s record year of sales was fueled by a huge inventory build to get ahead of potential China tariffs and prices in memory chips that had been on the rise. The inventories have now been used up and trade-war fears have lessened, 2020 is expected to pick up to the 2018 clip.

Q4

Full Year

To view, the full release go here