Micron shows how the cloud is saving chip makers


Memory-chip maker Micron Technology Inc. was saved by a boom in data centers, adding to chip makers’ growth as the pandemic forces more companies to expand their cloud computing capabilities.

On Monday, Micron
MU,
+1.35%

reported better-than-expected fiscal second-quarter earnings and had a stronger outlook for the next quarter, despite some issues with the global supply chain due to the COVID-19 pandemic. Micron’s shares jumped nearly 6% in after-hours trading. At Monday’s close, Micron was trading at $49.15, down 8.62% for the year but a huge recovery from its plunge in March, when it hit a low of $31.13 in the early days of the pandemic.

“We continue to see healthy demand trend in cloud in the second half of the year,” Micron Chief Executive Sanjay Mehrotra told analysts on a conference call. “Cloud is still actually in early innings, and long-term trends for cloud are strong.” In the second quarter, the company said that the work-from-home economy, e-commerce and videogame streaming all drove a strong surge in demand for more cloud-computing capabilities.

Micron’s comments echo those that other chip giants, such as Intel Corp.
INTC,
+1.33%

and Nvidia Corp.
NVDA,
+0.49%

NVDA,
+0.49%
,
made last quarter. On Monday, Xilinx Inc.
XLNX,
+1.03%

joined the crowd when it updated its guidance for its fiscal first quarter, noting that strong performance in wireless and data center were offsetting weakness in consumer segments.

In the second half of the year, Micron said that it expects demand for consumer technology products such as PCs and smartphones to improve. That’s in part due to the ongoing rollout of 5G networks, which will drive demand of new smartphones that have more dynamic random access memory (DRAM) chips, compared to 4G-network phones. The company said that average selling prices of both DRAM chips and NAND flash memory were up sequentially from the previous quarter.

One issue hovering over the company, and indeed most chip makers, is the growing rise in inventories, both by Micron and its customers, especially in the smartphone market. When asked by an analyst about the growing inventories, Mehrotra said its customers are trying to prepare for when consumer demand returns.

“Customers want to be prepared to supply the smartphone demand” when it returns, he said. “So, overall, you know, it’s a mixed picture with respect to the inventory on the customer front. Cloud inventories are in decent shape,” while mobile inventories are “somewhat in anticipation of demand.”

NVDA,
+0.49%

The chip industry has been amazingly resilient during the coronavirus pandemic, and most of the demand is due to data centers and the demand for more cloud computing. If the PC and smartphone markets return to growth, there could be even more upside for chip makers such as Micron. But for now, the sure thing is centered around the data center.



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Nvidia data-center sales top $1 billion for first time, earnings beat expectations


Nvidia Corp.’s data-center sales topped $1 billion for the first time at the start of 2020 as the company beat expectations for earnings and sales, but shares were sluggish in late trading Thursday following nearly a week of record closes.

Nvidia
NVDA,
-2.17%

reported first-quarter net income of $917 million, or $1.47 a share, compared with $394 million, or 64 cents a share, in the year-ago period. Adjusted earnings were $1.80 a share, compared with 88 cents a share in the year-ago period. Revenue rose to $3.08 billion from $2.22 billion in the year-ago quarter.

Analysts surveyed by FactSet had forecast earnings of $1.65 a share on revenue of $2.97 billion. Nvidia had forecast revenue of $2.94 billion to $3.06 billion, which had factored in a $100 million headwind from the COVID-19 pandemic.

Shares shifted between slight gains and losses, and were last down 1% in after-hours trading, following a 2.2% decline in the regular session to close at $351.01. Thursday’s regular session was the first decline for Nvidia’s stock after a run of four consecutive closes at record highs.

Business in the Age of COVID-19: Nvidia should dodge coronavirus effects thanks to data centers and videogames

Nvidia’s two largest segments are chips for gaming and data centers, both of which seem safe from negative effects from the coronavirus pandemic after emerging from a year of struggle at the end of 2019. Data-center operators continue to push new chips into their servers to increase machine-learning capabilities for cloud customers and their own usage, while videogames have enjoyed a strong surge amid shelter-in-place requirements.

Nvidia launched new data-center products like its A100 graphics-processing unit last week as part of its annual GTC event, introducing a new architecture for its GPUs, dubbed Ampere. Chief Executive Jensen Huang said then that the new chips were already being shipped to customers, including the largest cloud-computing offerings such as Amazon.com Inc.’s
AMZN,
-2.05%

Amazon Web Services, Microsoft Corp.’s
MSFT,
-1.20%

Azure and Alphabet Inc.’s
GOOGL,
-0.17%

GOOG,
-0.27%

Google Cloud.

For more: Nvidia unveils Ampere GPU architecture for AI boost, and the first target is coronavirus

Nvidia reported gaming revenue of $1.34 billion, up from $1.06 billion in the year-ago period. Data center revenue came in at $1.14 billion, the first time the segment has cleared $1 billion in sales. That’s up from $634 million a year ago. Analysts had expected a 24% rise in gaming sales to $1.3 billion from a year ago, and a 62% surge in data-center sales to $1.03 billion.

“Cloud is a $100 billion market segment of IT today, growing at 40% into a $1 trillion opportunity,” said Jensen Huang, Nvidia founder and chief executive, on a conference call. “Cloud computing is the single largest IT industry transformation that we have ever seen. The two forces that are really driving our data-center business are AI and Cloud computing. We’re perfectly positioned to benefit from these two powerful forces.”

Nvidia expects second-quarter revenue of $3.58 billion to $3.72 billion, while analysts had forecast revenue of $3.25 billion.

Patrick Moorhead, principal analyst at Moor Insights & Strategy, called the quarter “phenomenal” given the pandemic.

“The A100 data-center training/inference product appears to be off on a rocket-ship start, a very good sign,” said Moorhead in emailed comments. “Gaming and workstation growth are directly tied to competitive products and the need to work, govern and school from home.”

Nvidia shares are up 49% for the year. In comparison, the PHLX Semiconductor Index
SOX,
-2.70%

is down 3% in 2020, the S&P 500 index
SPX,
-0.77%

is down 9%, and the tech-heavy Nasdaq Composite Index
COMP,
-0.96%

is up nearly 4%.

Of the 40 analysts who cover Nvidia, 32 have buy or overweight ratings, five have hold ratings, and three have sell ratings, along with an average price target of $325.18, according to FactSet data.



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Chip stocks pump brakes to rebound as broader market keeps bleeding out


Chip stocks broke ranks with the rest of the tech sector on Friday, bouncing back amid a week long bloodbath for the broader market fueled by fear of the COVID-19 coronavirus.

Nvidia Corp.

NVDA, +2.02%

led gainers in the subsector Friday with a 4.2% advance, as the PHLX Semiconductor Index

SOX, -0.34%

 rose 1.1%. In comparison, the S&P 500 index

SPX, -2.60%

 was down 1.6% Friday, for a 12% drop on the week, and the tech-heavy Nasdaq Composite Index

COMP, -1.97%

 was down 0.7%, for a 11% weekly drop.

Nvidia shares were down 10% for the week, but up 12% for the month, to rank as the only chip stock on the S&P 500 with a February gain. The SOX index was down nearly 11% for the week and down 5.5% for February.

Read: Nvidia stock rockets past $300 to third straight record close as holdout analyst turns bullish

The only tech stock on the S&P 500 to show a gain on the week also held the distinction of being a chip stock. Qorvo Inc.

QRVO, +3.07%

 shares rose 4.4% Friday for a 0.8% weekly gain. But shares fell 6.6% in February.

On the whole, chip stocks fared best on Friday with as 13 out of the 16 chip stocks on the S&P 500 traded in positive territory Friday, beating out every other tech subsector on the index.

Of the 14 stocks in the software subsector, five traded higher on Friday with Autodesk Inc.

ADSK, +1.30%

 up 2.3% and Microsoft Corp.

MSFT, -0.18%

 up 2%. Oracle Corp.

ORCL, -4.25%

 led decliners down 3%. The iShares Expanded Tech-Software Sector ETF

IGV, -1.63%

 crept up 0.1% Friday, but is down 9.5% for the week and 6% for the month.

Three out of the eight stocks in the electronic equipment instruments and components subsector traded higher with IPG Photonics Corp.

IPGP, +3.35%

 leading gainers up 3.4%, and FLIR Systems Inc.

FLIR, -6.45%

 weighing on decliners down 5.7%

Seven out of the 21 IT services stocks on the S&P 500 traded higher Friday with FleetCor Technologies Inc.

FLT, -1.01%

 up 0.9%. Both Accenture PLC

ACN, -4.34%

 and International Business Machines Corp.

IBM, -3.83%

 weighed on the subsector with 3% losses.

Arista Networks Inc.

ANET, -1.65%

 was the only gainer in the communications equipment five-stock subsector with a 0.5% gain, while Motorola Solutions Inc.

MSI, -3.60%

 shares fell 2.3%

Of the seven technology hardware storage and peripherals stocks on the S&P 500, only Apple Inc.

AAPL, -2.53%

 and Western Digital Corp.

WDC, -2.18%

 rose, both with a 0.3% gain, while HP Inc.

HPQ, -5.74%

 and Xerox Holdings Corp.

XRX, -5.11%

 both declined 4%.

Outside of the S&P 500, the clear winner in tech from COVID-19 fears has been videoconferencing stock Zoom Video Communications Inc.

ZM, -9.19%

 While shares declined 8% on Friday, the stock is up 2.5% for the week and 37% for the month.



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Nvidia stock rallies more than 6% as data-center sales, outlook beat Street


Nvidia Corp. shares rallied in the extended session Thursday after the chip maker’s data-center sales and outlook topped Wall Street estimates while returning to revenue growth.

Nvidia

NVDA, -0.65%

 shares rose more than 6% after hours, following a 0.7% decline in the regular session to close at $270.78.

The company reported fourth-quarter net income of $950 million, or $1.53 a share, compared with $567 million, or 92 cents a share, in the year-ago period. Adjusted earnings were $1.89 a share.

Revenue rose to $3.11 billion for its first gain in four quarters, compared with $2.21 billion in the year-ago quarter.

Analysts surveyed by FactSet had forecast earnings of $1.67 a share on revenue of $2.96 billion.

Read: For chip companies, stocks soared as sales slumped in 2019 — what does that mean for 2020?

“Adoption of Nvidia accelerated computing drove excellent results, with record data-center revenue,” said Jensen Huang, Nvidia founder and chief executive, in a statement.

Nvidia reported a 56% gain in gaming sales from a year ago to $1.49 billion, while analysts had forecast $1.52 billion, and a 43% surge in data-center sales of $968 million, compared with the Wall Street consensus of $825.8 million.

“Nvidia had an incredible quarter with record revenue in many places,” said Patrick Moorhead, principal analyst at Moor Insights & Strategy. “Key drivers were PC gaming, driven by RTX and SUPER lines; data-center, driven by cloud giants with machine learning; and even growth in professional visualization.”

The company expects revenue of $2.94 billion to $3.06 billion for the first quarter, while analysts had forecast revenue of $2.85 billion. Nvidia said its revenue outlook accounts for a $100 million reduction from original estimates due to expected headwinds from the COVID-19 coronavirus.

Read: Nvidia earnings: A return to revenue growth expected after a tough year

Over the past 12 months, Nvidia shares have gained 77%. In comparison, the S&P 500 index

SPX, -0.16%

has gained 23%, the tech-heavy Nasdaq Composite Index

COMP, -0.14%

has grown 31%, and the PHLX Semiconductor Index

SOX, +0.08%

has increased 46% in that time.

Of the 39 analysts who cover Nvidia, 28 have buy or overweight ratings, nine have hold ratings and two have sell or underweight ratings, with an average price target of $262.41.



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Coronavirus fears roil Spain tech show as Intel joins Sony and Amazon in pulling out


Intel Corp. has become the latest major technology company to bail on one of the biggest mobile conferences of the year amid concerns over the outbreak of the coronavirus.

“The safety and well-being of all our employees and partners is our top priority, and we have withdrawn from this year’s Mobile World Congress out of an abundance of caution. We are grateful to the GSMA for their understanding and look forward to attending and supporting future Mobile World Congress events,” said a statement from Intel Corp.

INTC, +1.54%

INTC, +1.54%

on Tuesday.

Spanish media has reported that organizers will meet Friday to decide whether or not to go ahead with the annual Barcelona, Spain event. A spokesperson from the GSMA, an industry organization that represents the mobile industry and is behind the event, said it does not comment on internal meetings.

Amazon.com

AMZN, +0.79%,

Sony

SNE, +0.21%,

Ericsson

ERIC, +3.33%

ERIC.A, +6.01%

 Cisco

CSCO, +0.53%,

Facebook Inc.

FB, -2.76%

 , Nvidia

NVDA, +1.87%,

LG Electcronics

006570, -0.13%,

and NTT Docomo

9437, +0.32%

 are among those that have recently confirmed that they won’t be attending the event, which last year boasted nearly 110,000 attendees from 198 countries.

It’s precisely that attendee head count that alarms companies as the death toll from the fast-moving coronavirus has surpassed 1,000 and infections have reached 43,000 as of Tuesday. They have decided to stay away despite steps by the GSMA to try to ensure the safety of the event, such as banning travelers from the Hubei province, or those who can’t prove they have been out of China for 14 days, and temperature screening.

Chinese electronics group Xiaomi

1810, -0.16%

 tweeted out Tuesday that it will be attending the tech show, assuring that staff coming from China would adhere to the above guidelines, and the booth would be manned by local European office staff.

In fighting a tide of worrying headlines about the virus’s spread, GSMA is not alone. The U.S.-based Professional Convention Management Association is keeping a running tally of global events that have been postponed, canceled or altered due to the virus, such as this week’s Singapore Air Show where around 70 companies reportedly pulled out. Several cases of coronavirus in Europe have been linked to a business conference in Singapore.

Barcelona, meanwhile, has been struggling with the benefits and risks of hosting an event in the middle of the outbreak that the GSMA estimates is worth 500 million euros ($546 million) and 14,000 temporary jobs to the Spanish city.

“From the point of view of security and health, we can guarantee all the necessary measures will be taken,” said Jaume Collboni, deputy mayor of Barcelona, who was at pains to reassure potential visitors in a television interview on Tuesday.

But as some are arguing in Barcelona, the risk of spreading the virus may not be worth it. Spain has had just two infections to date, but both from non-Spaniards who contracted the illness outside the country.

Don’t miss: Coronavirus update: 1,018 deaths, a new case in San Diego, WHO to set research agenda

Also: Coronavirus may be smaller risk to Chinese manufacturing than feared, says JPMorgan

Oriol Mitjà, associate professor at the Fight AIDS and Infectious Diseases Foundation in Barcelona, tweeted Monday that canceling the show would be a wise move, given the many arrivals coming from the Asian region, as he notes one case of the virus holds a 20% to 30% chance of an outbreak.

“The cost of postponing or canceling #MWC2020 is less than the cost of controlling a potential epidemic. And who is going to pay the costs of controlling that epidemic? GSMA or the ICS [The Catalan’s Health Institute],” he said, according to a translation of his tweet.





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