GPU demand is so weak that Nvidia is reporting a 51% drop in gaming revenue for fiscal Q3. 

During the Q3 period, which ended on Oct. 30, Nvidia’s gaming revenue only reached $1.57 billion, down from $3.2 billion a year ago. 

This comes after Nvidia reduced the amount of graphics cards it sold to retailers to cut down on the oversupply situation facing the GPU market. In an investor’s note(Opens in a new window), CFO Colette Kress said both the ongoing economic downturn and COVID-19 lockdowns in China “continue to weigh on consumer demand” for both laptop- and desktop-based GPUs. 

The other factor behind the falling demand has been the decline of cryptocurrency mining. Back in September, Ethereum ended GPU-based mining, which was a significant driver of Nvidia graphics card sales over the past two years. 

“We believe the recent transition in verifying Ethereum cryptocurrency transactions from proof-of-work to proof-of-stake has reduced the utility of GPUs for cryptocurrency mining,” Kress wrote. “This may have contributed to increased aftermarket sales of our GPUs in certain markets, potentially impacting demand for some of our products, particularly in the low-end.” 

During the fiscal Q3 period, Nvidia also launched the GeForce RTX 4090 graphics card, which has been selling out, despite its high $1,599 price. But even so, the product failed to prop up Nvidia’s gaming revenue in the quarter. 

The weak demand has also caused Nvidia’s supplies of graphics cards to balloon. In the earnings report, the company’s inventory reached $4.45 billion, up from $2.2 billion a year ago. 

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Despite the plummeting gaming revenue, Nvidia is still seeing growth in the enterprise space. Data center revenue saw a 31% year-over-year increase in Q3, while automotive revenue increased by 86%. In total, revenue for the period reached $5.9 billion, down 17% a year ago. 

Nvidia expects the hard times to continue in fiscal Q4, which would end in January. The company is projecting revenues for the period will only reach $6 billion, down from $7.6 billion a year before. That said, Kress expects GPU supplies to reach normal levels as the company exits Q4.

“We are quickly adapting to the macro environment, correcting inventory levels and paving the way for new products,” Nvidia CEO Jensen Huang said in a statement.

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