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Alarm bells are being rung about the Chinese economy

Nvidia is the latest company to blame a downward forecast revision on deteriorating economic conditions in China.

Scott Bicheno

January 28, 2019

2 Min Read
Alarm bells are being rung about the Chinese economy

Nvidia is the latest company to blame a downward forecast revision on deteriorating economic conditions in China.

In an announcement today Nvidia said it expects Q4 2018 revenue to be $2.2 billion instead of its previous guidance of $2.7 billion, a downgrades of around 20%. Nvidia’s previous fourth-quarter guidance had embedded a sequential decline due to excess mid-range channel inventory following the crypto-currency boom,” said the announcement.

“The reduction in that inventory and its impact on the business have proceeded largely inline with management’s expectations. However, deteriorating macroeconomic conditions, particularly in China, impacted consumer demand for Nvidia gaming GPUs.

To make matters worse the initial guidance had been way below analyst expectations of $3.4 billion, with a crash in cryptocurrency-related computing blamed for that too, so it looks like Nvidia needed something else to blame this time. At time of writing Nvidia’s share price was down 14% from yesterday’s close and it has halved since its peak at the start of October 2018.

At the start of this month Apple downgraded its anticipated Q4 revenues from $91 billion to $84 billion (around 10%), with China culpable once more. “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” said Apple CEO TIM Cook at the time.

A lot of attention is understandably going towards the trade aggros between the US and China, but this macroeconomic declines seems too entrenched to be just down to that. The official line is that China’s lowest GDP growth for decades is all part of the grand plan to stop the economy overheating. But the problem is few people seem to trust the public numbers.

They probably do trust the reporting of US listed companies, however, and will interpret warnings like these and others as a truer measure of the state of the Chinese economy. If more companies blame their rubbish earnings on China there is a real risk of self-reinforcing panic.

About the Author(s)

Scott Bicheno

As the Editorial Director of Telecoms.com, Scott oversees all editorial activity on the site and also manages the Telecoms.com Intelligence arm, which focuses on analysis and bespoke content.
Scott has been covering the mobile phone and broader technology industries for over ten years. Prior to Telecoms.com Scott was the primary smartphone specialist at industry analyst Strategy Analytics’. Before that Scott was a technology journalist, covering the PC and telecoms sectors from a business perspective.
Follow him @scottbicheno

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