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Why is Nvidia so optimistic about the impact of COVID-19 on the global tech market?

Nvidia gave a relatively optimistic view of its business against the backdrop of the severe global coronavirus epidemic, which has also brought a considerable impact on the technology market.

Nvidia said recently that demand from large cloud service providers, many of which use Nvidia chips in their data centers, remains strong. The company was also upbeat about its gaming-related business, noting that its PC gaming business surged as more workers and students stayed home.

In particular, Nvidia didn't take the opportunity to change or withdraw the guidance it made in its latest earnings report in mid-February, and still expects revenue of about $3 billion for its fiscal first quarter ending in April. That would represent a 35 per cent increase in revenue from a year ago. As Nvidia explained at the time, its projections included an estimated $100 million in losses from the outbreak, which came as factories and businesses across China were shuttered, including Internet cafes where gaming chips were in high demand.

The company's upbeat tone contrasts with a flurry of downgrades across the technology sector.On Monday afternoon, Twitter(TWTR), online real estate company Zillow(Z), chip device maker AppliedMaterialsInc. (AMAT) and Roomba vacuum cleaner maker iRobot(IRBT) issued earnings warnings. Nvidia shares surged 17 percent on Tuesday, leading chip stocks higher as the sector was buoyed by a broader rebound.

Still, investors should be cautious. A global recession looks imminent, and even Nvidia's favorable portfolio of businesses is not immune. The video game business, which still accounts for more than half of Nvidia's revenue, has certainly been resilient in past downturns and in the current downturn. But PCS with Nvidia chips are still expensive, making them harder to swallow when discretionary revenue is hit. Nvidia also faces increased competition in this area from AdvancedMicroDevicesInc.

The fast-growing cloud business is not immune, as a recession could slow the big corporate deals that have fueled the sector's growth. And while big cloud providers such as Amazon.comInc., Microsoft Corp. and AlphabetInc's Google have enough cash to invest in their Web businesses during a downturn, But they had to deal with serious challenges to their core business during the pandemic. Public cloud leader Amazon is working to hire 100,000 workers to expand its warehousing and delivery of basic household goods and food.

Analysts still expect Nvidia's data center revenue to climb 65% in the current quarter. That does not prepare the chipmaker for a prolonged downturn.