Woe has come to a chip company and for a change it isn’t AMD. In fact it may be AMD-inflicted.

Late Wednesday GPU leader Nvidia, which competes with Intel and AMD’s ATI graphics side, said its current quarter had come a cropper and that everybody should cut their expectations from $1.1 billion in revenue to somewhere between $875 million to $950 million, something like a 17% sequential drop. It had predicted a seasonal 5% decline a couple of months ago.

The news set off a veritable bloodletting and when the market closed Thursday Nvidia’s stock was down over 30% to $12.49.

Nvidia blamed lower ASPs (widely attributed to AMD’s aggressive pricing though Nvidia didn’t say that), lower end-user demand worldwide and production delays with a next-generation media communications part (which it estimated cost it $50 million).

It’s also had a nasty experience with power management issues in certain of its last-generation GPUs used in laptops that are now out in the field.

And so it’s taking a one-time charge of  $150 million-$200 million to cover the warranty, repair and replacement expenses caused by the widgets’ higher-than-normal failure rates.

Nvidia is also switching the materials used, although it hasn’t established the root cause of the problem, and is offering a driver to keep the fans blowing on the stressed part. It wants its OEMs to change their thermal management.

It’s also talking to its insurance company.  

It has yet to establish exactly which chips are impacted.

Whereas it previous thought it could deliver a gross margin up a point from Q1’s 44.6%. It’s now saying it’ll be lower.

Analysts figure the miss is company-specific. Both ATI and Nvidia have launched new products recently, with Nvidia appealing to the high-end performance crowd and ATI the more budget-conscious.

Nvidia’s quarter ends July 27.