On Monday, Nvidia shares fell as much as 8.6%. The stock was down 5.1% as of 10:29 a.m. ET.

Semiconductor specialists’ disappointing preliminary financial results sent the stock lower. The overall economy seems to be weighing on the chipmaker.

Let’s play

Nvidia expects revenue of roughly $6.7 billion in its fiscal second quarter (ended July 31), up 3% year over year but down 19% sequentially. This figure was much lower than its previous guidance of $8.1 billion.

As a result of weak demand for gaming processors, its sales fell short of expectations. Gaming revenue is expected to be $2.04 billion, down 33% year over year and 44% sequentially.

According to Nvidia, its channel partners and resellers are experiencing weaker demand for its gaming processors due to macroeconomic headwinds. Nvidia “implemented pricing programs” to address these challenges, which are expected to persist into the third quarter.

Meanwhile, Nvidia’s data center revenue grew 61% year over year, and 1% quarter over quarter, to $3.81 billion. Although the data center segment still generated record revenue, it fell short of the company’s lofty expectations.

So…

According to Nvidia’s economic outlook, it expects to take a charge of roughly $1.32 billion in the second quarter, primarily to cover inventory and related reserves.

Colette Kress, company CFO, explained the charges because of “long-term purchase commitments” made at a time of supply chain disruptions and “severe component shortages,” as well as the company’s “current expectation of macroeconomic uncertainty.”

Despite this quarter’s preliminary performance being disappointing for investors, it’s worthwhile to consider the potential long-term opportunity. The company is reducing operating expenses but plans to continue share repurchases as it expects “strong cash flow generation and future growth.”