Nvidia Core PC Gaming Business Grows 49%, Contrary To BMO Capital’s Forecast Of Weaker Video Game Chips Market

The market for video game chips did not weaken in the first quarter of fiscal 2018, a report from Nvidia reveals. Its core PC gaming business grew 49 percent compared to the same quarter in fiscal 2017. The figures proved the forecast by Ambrish Srivastava, analyst of BMO Capital, wrong.

On Feb. 23, Srivastava cut his rating on chipmaker Nvidia to “Underperform” from “Market Perform” ahead of the company’s release of its Q1 financial report on May 9. He made the change out of the belief that the video game chips market would suffer a breakdown in fiscal 2018. The analyst’s forecast then was as the year progresses, there would be a slowdown in gaming, while competition in datacenter would start to show, according to Barron’s.

Because of his forecast of a weaker video game chips market, Srivastava also cut his earnings per share (EPS) estimate for Nvidia to $2.71 from $3 for fiscal 2018. For fiscal 2019, he predicted Nvidia’s EPS would also go down to $3.15 from $3.45. For Q1 fiscal 2018, his estimate is a revenue of $1.94 billion and EPS of 66 cents.

However, Forbes reports that Srivastava’s assumption of a weaker video game chips market was way off. Nvidia did not only continued fiscal 2017’s growth momentum in the current Q1 fiscal 2018, the chipmaker even beat its own guidance and expectations of analysts. The company logged broad-based year-on-year growth across platforms, whether it was gaming, professional visualization, data center, and automotive.

Following Nvidia’s release of its Q1 fiscal 2018 report, which disproved Srivastava’s theory that the video game chips market would contract, the company’s share price rose more than 17 percent on Wednesday, CNBC reports. Instead of the 66 cents EPS forecast made by the BMO analyst, the chipmaker reported a 79 cents EPS. Diluted or GAAP EPS was up 126 percent compared to the previous fiscal year’s 35 cents.