nVidia. I refuse to believe that the worst is over yet.

There have been a lot of road-kills in the graphics business [Chips & Technologies, S3, Cirrus Logic, Tseng Labs come to mind], which is always cyclical, and "owned" by a player or two. For now, nVidia is one of the big two, and will continue to be - till the next major breakthrough in graphics processing creates a new winner [or a new old winner].

I had an opportunity to listen to nVidia's mea culpa conference call - after the earnings announcement that fell short, but wasn't as bad as expected. While this is fine and dandy, it just seems too "perfect" to me, and I refuse to believe that the long-term effects of this admitted snafu will last only one quarter. Why am I being pessimistic ?

a. NVDA came in closer to the low-end of their own guidance of $875M to $950M in revenues [I'd have thought that they had an excellent idea by mid-July as to what they would probably announce].
b. I believe in the cockroach theory. If you see a roach, there are a hundred below the floor-boards that you do not see.
c. In the semiconductor industry, even the best systems cannot stop the "propagation" of a mistake into other areas.
d. nVidia's cycle-time - from when they start designing a chip, to getting it fully qualified at Microsoft [to work with the OS and the graphics API] - to the time the company recognizes revenue from the product is anywhere from twelve to eighteen months [though occasionally, I have heard the company venture smaller numbers (which is possible for re-designs and incremental improvements)].
e. The announcement of a stock buy-back means nothing. Implementation thereof is key [see Linear Tech in my previous article].

Let me be very clear that I believe in Jen-Hsun Huang and his resilience. In fact, NVDA has been through bankruptcy protection once and emerged triumphant [which very few semiconductor companies have done in the past].


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