FXAC

Nvidia Corporation (NASDAQ:NVDA) shares are down about 2.8% Friday in premarket trading, sliding with a chip selloff led by Intel Corporation (NASDAQ:INTC), which is down 25.9% after it reported earnings and issued guidance Thursday after the market closed. Advanced Micro Devices, Inc. (NASDAQ:AMD) fell 8.04% and Broadcom Inc. (NASDAQ:AVGO) was down 3.92% as the weakness spread across major chipmakers.

• Nvidia stock is under selling pressure. What’s driving NVDA stock lower?

Intel Beats on Earnings and Revenue but Guides Q4 Well Below Estimates

Intel reported third-quarter earnings of 52 cents per share, beating the consensus estimate of 40 cents. It reported revenue of $16.51 billion, beating the consensus estimate of $16.47 billion. The fourth-quarter outlook is what moved the stock. Intel expects adjusted earnings per share of 25 cents, against the consensus estimate of 43 cents, and revenue of $15 billion to $16 billion, against the consensus estimate of $17.05 billion.

"Despite near-term headwinds across the PC industry, demand for our CPUs remains robust," said Lip-Bu Tan, Intel’s CEO. "Our immediate priority is to unlock additional supply to meet extraordinary demand for our Xeon family."

Why Intel’s Report Is a Read-Through for Nvidia

Nvidia’s AI accelerators are a different business from Intel’s PC and server processors, so the read-through is partly about sentiment and partly about exposure. A drop of this size in a large chipmaker pulls the group lower as investors cut positions in stocks that have run up, and Intel’s warning about PC industry headwinds adds to the questions.

Nvidia also owns about 214.8 million Intel shares, bought for $5 billion at $23.28 each in a deal completed in December, and the two companies are developing x86 RTX chips for PCs and custom x86 CPUs for data centers. The stake was valued at about $30.0 billion on June 30, according to Nvidia’s filing, and at Intel’s extended-trading price of $76.85 it would be worth about $16.5 billion. On the other side, Tan said demand for Intel’s server CPUs is extraordinary, which fits with strong AI infrastructure spending.

Nvidia Reports in Mid-November, With Analysts Expecting About $108.8B in Revenue

Nvidia is expected to report fiscal third-quarter results after the market closes on Nov. 17. Analysts estimate earnings per share of $2.48 along with revenue of $109.17 billion. Nvidia guided to revenue of about $108 billion for the quarter. In the second quarter, Nvidia reported revenue of $96.22 billion, up 106% from a year earlier, and beating the consensus estimate of $92.18 billion. Data center revenue of $89.0 billion, up 117%. Non-GAAP earnings per share was $2.22, beating the consensus estimate of $2.10.

Nvidia Shares Edge Lower

NVDA Price Action: At the time of publication, Nvidia shares are trading 2.89% lower at $207.49, according to data from Benzinga Pro.

Image via Shutterstock