Chip designer Nvidia predicted that sales its video game chips would fall in the quarter and spooked some analysts by listing new supply chain problems caused by China’s COVID-19 lockdown.

Chief executive Jensen Huang told Reuters that Nvidia’s gaming business revenue will decline by around 10 percent this quarter compared with the previous quarter.

“Overall, the gaming market is slowing down,” Huang said. Based on weak market demand, Nvidia chose to reduce sales to the Chinese market, he said. Nvidia has also been hit by Russia and is seeing “slower sales” in Europe, he said.

Nvidia shares fell 6.7% in after-hours trading, even though the company’s first-quarter revenue and earnings beat analysts’ expectations. The stock is down about 0% so far this year as growth stocks have seen a broader sell-off amid fears a sharp Fed rate hike.

Concerns about inflation are spreading through the U.S. economy as consumers weigh purchases items like laptops and video game consoles.

Nvidia expects second-quarter revenue of $8.10 billion (approximately Rs 62,82 crore), plus or minus 2%. Analysts on average had expected $8.45 billion (Rs 65,557 crore), according to IBES data from Refinitiv. The lower revenue forecast includes an estimated reduction around $500 million (approximately Rs. 38.79 crore) related to the COVID-19 lockdowns in Russia and China. Chief Financial Officer Colette Kress said the $500 million figure included about $400 million (about 31.03 billion rupees) in lost game sales in China and Russia, and another $100 million in lost data center sales in Russia.

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Kress told analysts on an earnings call that China’s COVID lockdown has impacted consumer spending in addition to logistics.

Dan Morgan, senior portfolio manager at Synovus Trust, said it was puzzling that a company that had so far performed well in supply hurdles suddenly hit a snag.

Summit Insights Group analyst Kinngai Chan said nearly every tech company that missed the prospect was blaming the Russia-Ukraine conflict and China’s COVID-19 lockdown. He expects Nvidia to face more downturns in the future.

One analyst was more optimistic.

“The after-hours pullback is an overreaction to geopolitical events beyond the company’s control, rather than a weak demand environment,” said Edward Jones analyst Logan Pulke, noting Nvidia’s slump.

Weak graphics chip prices and reduced discretionary spending could weigh on Nvidia’s gaming business amid high inflation, experts said.

The slump in the cryptocurrency market has also hurt demand for its graphics processing units, which are favored by cryptocurrency miners. Nvidia’s “OEM and other revenue” category fell 52% year over year due to lower revenue from cryptocurrency mining processors, Chief Financial Officer Kress said in a Wednesday.

Still, demand from data center customers remains strong as more companies turn to cloud computing and incorporate artificial intelligence into their operations. That and auto sales will help offset the decline in gaming, Kress said. Data center revenue reached a record $3.75 billion (approximately Rs. 290.97 billion) in the first quarter, up 83% year-on-year. Gaming revenue in the first quarter also hit a record $3.62 billion (approximately Rs 28,086 crore), up 31% year-on-year.

Revenue rose 6 percent to a record $8.29 billion (Rs 643.2 crore) in the first quarter ended May 1. Excluding items, the company earned $1.36 (about Rs 105) per share, beating expectations of $1.29 (about Rs 100).

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