Switch SoC shipments from Nvidia lower than expected, Nintendo's stock price down nearly 10%

ZhugeEX · Nov 16, 2018

Nvidia reported Q3 2018 results yesterday;
Third quarter revenue came in below expectations and guidance for the rest of the year was weaker than expected. Essentially we are post crypto boom so things are slowing down a bit.

In addition to Nvidia's stock price taking a hit, Nintendo also saw its largest drop in two years due to news regarding Tegra processor shipments during the traditionally high 'seasonal period'.

Tegra® Processor business revenue - which includes Automotive, the Nintendo Switch gaming console, and embedded edge AI platforms - was $407 million, down 3 percent from a year ago and down 13 percent sequentially

In addition to being down YoY and QoQ, Nvidia reported that they expected to see minimal sales of Tegra shipments in Q4 too. This does make sense as Q3 shipments are mostly for the holiday and Q4 shipments would be for after holiday.

Our Q4 outlook for gaming reflects very little shipment in the midrange Pascal segment to allow channel inventory to normalize. In Q4, we also expect minimal sales of Tegra chips for game consoles due to the normal seasonal build cycle.

Nintendo is targeting 20 million Switch shipments this fiscal year. Investors are concerned that this news could point to Nintendo failing to hit this target. However, it is worth noting that Nintendo's inventory level is currently at its highest point since Switch launched which indicates that Switch stock is actually quite high already and could explain why Nvidia saw a decline in Tegra shipments this quarter and is forecasting 'minimal sales' next quarter.

https://s22.q4cdn.com/364334381/fil...y_reports/2019/Q319/Q3FY19-CFO-Commentary.pdf
https://www.reuters.com/article/jap...dent-chip-sector-nintendo-dives-idUSL4N1XR2HD

FiXalaS · Nov 16, 2018

Nintendo doomed

If Switch is at a high point now why is stock down?

edit: oh okay I see

darkside · Nov 16, 2018

im gonna irrationally blame pokemon lets go instead of this nvidia thing

Deleted member 2145 · Nov 16, 2018

stock threads on Era are always classic

also good time to buy

ggx2ac · Nov 16, 2018

ZhugeEX said:
Essentially we are post crypto boom so things are slowing down a bit.

In addition to Nvidia's stock price taking a hit,

Compared to yesterday, it's taking a really big hit today.

Skittzo · Nov 16, 2018

So basically investors see an indication that supply for Nintendo MIGHT be down and panic, even though we have concrete information indicating that supply is way up?

pulsemyne · Nov 16, 2018

The drop in Tegra stuff could be more related to cars and nvidia shield rather than Switch sales. Seems like nintendohave been stocking up for smash and pokemon sales so they don't run out over christmas.

Deleted member 33887 · Nov 16, 2018

Nvidia reported they have 12 weeks of Pascal inventory when they're pushing out Turing. Turing isn't doing that well. Nvidia's stock should have never hit the highs it did, so people are dropping it like a rock since the immediate future doesn't look great.

The sky high persistent growth expectations were never that realistic.

ZhugeEX · Nov 16, 2018

pulsemyne said:
The drop in Tegra stuff could be more related to cars and nvidia shield rather than Switch sales.

The majority of revenue from the Tegra segment is for Switch. It's been that way since Switch launched.

skittzo0413 said:
So basically investors see an indication that supply for Nintendo MIGHT be down and panic, even though we have concrete information indicating that supply is way up?

Basically. Nintendo's inventory level is extremely high, but at the same time it is surprising to see Tegra shipments decline like this.

Deleted member 1413 · Nov 16, 2018

They saw the frame rate in Veridian Forest and got *pissed*

Will probably go up after smash and pokemon, but if they're ready to trounce the stock over NVIDIA maybe shipping fewer units, can't imagine they'll be fine with Nintendo missing their forecast officially

Skittzo · Nov 16, 2018

ZhugeEX said:
Basically. Nintendo's inventory level is extremely high, but at the same time it is surprising to see Tegra shipments decline like this.

I guess that could just be a reflection of the Switch's relatively muted sales this whole year. Production has probably been up since Q4 last year but if sales aren't up enough to match it then they're left with a huge stockpile for the holiday season.

Stouffers · Nov 16, 2018

So.. BUY NVIDIA

1-D_FE · Nov 16, 2018

skittzo0413 said:
So basically investors see an indication that supply for Nintendo MIGHT be down and panic, even though we have concrete information indicating that supply is way up?

I would assume the stock is way down because of the glut of mid-range cards. I don't really see what Switch stock has to do with this. The fact that Switch stock is way up, even though Tegra shipments were down last quarter and expected to be non-existent this quarter doesn't exactly point to things being rosy on that front, though. But it really shouldn't effect Nvidia since this is such a minor part of their business anyways. This will panic Nintendo stock a lot more than Nvidia. It's the rest causing issues for Nvidia.

Understanding stock markets are all based on hysteria anyways. So it's all a game anyways.

ggx2ac · Nov 16, 2018

pulsemyne said:
The drop in Tegra stuff could be more related to cars and nvidia shield rather than Switch sales. Seems like nintendohave been stocking up for smash and pokemon sales so they don't run out over christmas.

It's not, Automotive has been up 7% QoQ and up 19% YoY.

And Nvidia Shield is a niche product. Switch is what increased their Tegra business revenue to new levels since it first appeared.

Kanann · Nov 16, 2018

Switch U will be AMD, sorry big n.

Maneil99 · Nov 16, 2018

Get fucked Nvidia. 2000 series is trash

Galkinator · Nov 16, 2018

Stouffers said:
So.. BUY NVIDIA

Or NTDOY

...or both

fiendcode · Nov 16, 2018

skittzo0413 said:
I guess that could just be a reflection of the Switch's relatively muted sales this whole year. Production has probably been up since Q4 last year but if sales aren't up enough to match it then they're left with a huge stockpile for the holiday season.

What about the possibility of the new Switch supposedly launching next year? 20nm X1 production ramping down may also have a strategic driver contributing to it.

~Fake · Nov 16, 2018

ggx2ac said:
Compared to yesterday, it's taking a really big hit today.

Thats a big hit.

Celine · Nov 16, 2018

Nintendo bet all on the holiday season this FY.
They had to build up the inventory required to match their ambitious forecast before the actual holiday season to not lose sales when demand should be high.

Rodjer · Nov 16, 2018

Kanann said:
Switch U will be AMD, sorry big n.

Nintendo has a 10 years deal with Nvidia, AMD is not making low level mobile chips like Tegra.

fiendcode · Nov 16, 2018

Kanann said:
Switch U will be AMD, sorry big n.

Yes but that's called "PlayStation 5"...

/s

Durante · Nov 16, 2018

Kanann said:
Switch U will be AMD, sorry big n.

Given that AMD has yet to match even last-gen Nvidia power efficiency with their GPU architecture, that wouldn't be a very wise choice for a highly power-limited platform. (Never mind compatibility)

Skittzo · Nov 16, 2018

fiendcode said:
What about the possibility of the new Switch supposedly launching next year? 20nm X1 production ramping down may also have a strategic driver contributing to it.

Wouldn't a new process node's production still be part of the Tegra business? Or are you suggesting that there might be a gap between being able to ship 20nm X1s and whatever the new SoC will be?

1-D_FE · Nov 16, 2018

skittzo0413 said:
Wouldn't a new process node's production still be part of the Tegra business? Or are you suggesting that there might be a gap between being able to ship 20nm X1s and whatever the new SoC will be?

Yes it would still be part of the business. And there's definitely no gap being that 16nm tegras have been available since before the Switch launched. Now if we're talking about 7nm "X3", sure, but Nintendo isn't going to stop production for that. This is about underperforming sales.

Braaier · Nov 16, 2018

Nvidia stock crashing. YIKES!

fiendcode · Nov 16, 2018

skittzo0413 said:
Wouldn't a new process node's production still be part of the Tegra business? Or are you suggesting that there might be a gap between being able to ship 20nm X1s and whatever the new SoC will be?

I'm thinking a gap since the new model won't launch until next FY. Probably late Q2 at earliest.

If Nintendo has 20nm X1 overstock thry might elect to ride things out somewhat.

Skittzo · Nov 16, 2018

1-D_FE said:
Yes it would still be part of the business. And there's definitely no gap being that 16nm tegras have been available since before the Switch launched. Now if we're talking about 7nm "X3", sure, but Nintendo isn't going to stop production for that. This is about underperforming sales.

Yeah that's how I see it too, though underperforming relative to investor expectations is probably a better way to put it. Nintendo clearly expected the bulk of their sales to be in Q3 this year so it shouldn't be terribly surprising to them that sales were a bit middling before then.

fiendcode said:
I'm thinking a gap since the new model won't launch until next FY. Probably late Q2 at earliest.

So you think they've stopped production of base Switches and are now unable to ship the new model too? Wouldn't that put Nintendo in danger of being heavily supply constrained for a large portion of 2019 if holiday sales exceed their expectations?

Okii · Nov 16, 2018

RTX offload

VX1 · Nov 16, 2018

What i find interesting is that even car makers are dumping Nvidia and want to put their own chips inside,like Tesla.

1-D_FE · Nov 16, 2018

VX1 said:
What i find interesting is that even car makers are dumping Nvidia and want to put their own chips inside,like Tesla.

I don't doubt this is happening, but the Tech Report article states the automotive business was up 19% from last year. So this isn't Nvidia's problem on this revenue report.

BernardoOne · Nov 16, 2018

Time to get some Nintendo stock

fiendcode · Nov 16, 2018

skittzo0413 said:
So you think they've stopped production of base Switches and are now unable to ship the new model too? Wouldn't that put Nintendo in danger of being heavily supply constrained for a large portion of 2019 if holiday sales exceed their expectations?

Not stopped but reduced, and that's supposing a healthy stock surplus. 20nm lines likely aren't cheap to maintain at this point and it could point to the Switch revision being more of an iterative replacement rather than a supplemental addition.

VX1 · Nov 16, 2018

1-D_FE said:
I don't doubt this is happening, but the Tech Report article states the automotive business was up 19% from last year. So this isn't Nvidia's problem on this revenue report.

I know,i just find it funny...first console makers,now car makers... :)

Nvidia is difficult partner,we know that.

Skittzo · Nov 16, 2018

fiendcode said:
Not stopped but reduced, and that's supposing a healthy stock surplus. 20nm lines likely aren't cheap to maintain at this point and it could point to the Switch revision being more of an iterative replacement rather than a supplemental addition.

Ah yeah I guess that could make sense.

Either way it looks like investors (on the Nintendo side) are panicking for no reason. Everyone knew this year would ride on the holiday season more than most other years. That should have been baked into the price months ago.

1-D_FE · Nov 16, 2018

VX1 said:
I know,i just find it funny...first console makers,now car makers... :)

Nvidia is difficult partner,we know that.

I think it's more to do with really wanting specialized chips for AI. I don't think automakers and console makers really have anything in common. Because if you want a beastly GPU, you still need to go through one of the big boys. And yeah, you could roll your own in the mobile space (like Apple did), but that's crazy expensive and a company like Nintendo would never go that route. Nintendo wants cheap components that can be repurposed for maximum profit.

Booga · Nov 16, 2018

Would it be completely crazy to think this is related to the rumoured upcoming Switch revamp? Like Nintendo will be putting a different chip in all Switch units moving forward, and perhaps an even stronger version for a "pro" or "clamshell" budget Switch?

I suppose the chip would need to be somewhat similar or current Switch games might run into odd performance issues. There is a lot I don't know about how the software interacts with the hardware and what is dependant on what.

I'm just spitballing. Has Nvidia seen an increase in the production of any similar but slightly stronger chips? That might be informative.

SleepSmasher · Nov 16, 2018

Duxxy3 · Nov 16, 2018

Is the Nvidia crash the result of a wiff on the 20xx series, or because they had some many extra 10xx series around?

Personally speaking I think the 20xx is an absolutely horrible value, and Nvidia has dropped the ball with the low and mid range gpu market.

Dr. Mario · Nov 16, 2018

Duxxy3 said:
Is the Nvidia crash the result of a wiff on the 20xx series, or because they had some many extra 10xx series around?

Personally speaking I think the 20xx is an absolutely horrible value, and Nvidia has dropped the ball with the low and mid range gpu market.

Don't think many investors care about the PC gamer market. Nvidia has it cornered, growth will be minimal. People got into Nvidia somewhat for Switch but mostly because they expect Nvidia to corner the smart automotive market, which is THE big growth market of the coming decades. However, this division went down instead of up, while tech is already getting a beating, spooking investors something fierce.

Source: I put all my eggs in Nvidia stock.

Duxxy3 · Nov 16, 2018

Dr. Mario said:
Don't think many investors care about the PC gamer market. Nvidia has it cornered, growth will be minimal. People got into Nvidia somewhat for Switch but mostly because they expect Nvidia to corner the smart automotive market, which is THE big growth market of the coming decades. However, this division went down instead of up, while tech is already getting a beating, spooking investors something fierce.

Source: I put all my eggs in Nvidia stock.

Damn dude, sorry to hear that. I know a lot of people did.

Foltzie · Nov 16, 2018

Booga said:
Would it be completely crazy to think this is related to the rumoured upcoming Switch revamp? Like Nintendo will be putting a different chip in all Switch units moving forward, and perhaps an even stronger version for a "pro" or "clamshell" budget Switch?

I suppose the chip would need to be somewhat similar or current Switch games might run into odd performance issues. There is a lot I don't know about how the software interacts with the hardware and what is dependant on what.

I'm just spitballing. Has Nvidia seen an increase in the production of any similar but slightly stronger chips? That might be informative.

That would get reported under the same Tegra line for financials.

Nvidia isn't going to take a stock hit to conceal SoC sales.

Though I do wonder if Nvidia has to do something for Nintendo due to the exploit in the existing SoC.

Dr. Mario · Nov 16, 2018

Duxxy3 said:
Damn dude, sorry to hear that. I know a lot of people did.

No biggie, I only trade some stocks with money I can miss.

Keikaku · Nov 16, 2018

ggx2ac said:
Compared to yesterday, it's taking a really big hit today.

Bomba price drops incoming!

Duxxy3 · Nov 16, 2018

Keikaku said:
Bomba price drops incoming!

From the news I'm listening to and reading, they still have excess inventory of the 10xx series.

Just a guess - they have a lot of 1070 and 1060's out there. Something to look out for.

Mr_F_Snowman · Nov 16, 2018

skittzo0413 said:
I guess that could just be a reflection of the Switch's relatively muted sales this whole year. Production has probably been up since Q4 last year but if sales aren't up enough to match it then they're left with a huge stockpile for the holiday season.

Mayb Nintendo are powering the Switch Pro revision with magic pixie dust so once its released demand for the Tegra line will be dead

ethomaz · Nov 16, 2018

If I got that right Nintendo is not planing to buy to much more Tegra X1 to use this fiscal year due demand?

20m was a dream after the first two quarters results btw... sales are not supporting this forecast.

Deleted member 35598 · Nov 16, 2018

skittzo0413 said:
So basically investors see an indication that supply for Nintendo MIGHT be down and panic, even though we have concrete information indicating that supply is way up?

Pretty much. Weird.

daybreak · Nov 16, 2018

In other words, Nintendo stock is on sale!

Peleo · Nov 16, 2018

ethomaz said:
If I got that right Nintendo is not planing to buy to much more Tegra X1 to use this fiscal year due demand?

20m was a dream after the first two quarters results btw... sales are not supporting this forecast.

Sales absolutely support this forecast, since the start of the year Nintendo knew the sales would be back-loaded during Holiday Period with the Bundles, Smash and Pokemon.

They had the opportunity to decrease the forecast twice and still doubled-down on the "It will be very challenging but that is our aim".

Whether they reach or don't the 20m is another point of discussion, but the sales in Q1 and Q2 haven't affected their original plans.

Switch SoC shipments from Nvidia lower than expected, Nintendo's stock price down nearly 10%

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