Nvidia Q3 Earnings Report Reveals ‘Crypto Hangover’
November 17, 2018 by Akshay Makadiya
Powerhouse chip maker Nvidia just released its third-quarter financial figures, reporting a decline in revenue amid waning demand for its graphics processing units (GPUs) from crypto miners. The downturn in crypto mining left Nvidia with unsold GPUs, negatively impacting its fiscal 2019 third-quarter revenues.
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Nvidia Shares Nosedive With Crypto Hangover
The Santa Clara, California-based company’s share price plunged by as much as 18 percent as Q3 figures fell well shy of Wall Street expectations–partly due to the build-up of mid-range GPU inventory that once were in high demand among crypto miners.
Nvidia’s graphics processing units were mostly sought after by gamers until last year’s cryptocurrency boom. CEO Jensen Huang stated that GPU prices shot up due to explosive demand in Q4 2017 and Q1 2018, pricing out gamers.
The shortage of GPUs compelled the company to ramp up production, but as they did, the crypto mining boom began to fade. As a result, Huang solely blames the company’s exposure to the crypto market for excessive inventory levels. With the downtrend in sales to miners, graphics card prices began to drop. Per Huang:
“We were surprised, obviously. We were as surprised as anyone else. The crypto hangover lasted longer than we expected. When prices went down, we expected demand to pick up more quickly. We thought we had done a better job managing the cryptocurrency dynamics.”
According to their earnings report, overall Q3 revenue stood at $3.18 billion USD, falling short of analyst expectations of $3.24 billion. Underperforming market expectations, Nvidia stocks plunged to $163 a share, a drop of 43.5 percent from all-time highs of $289.36 a share last month.
Nvidia Had It Coming
The outcome was no surprise to the company or traders, as some Wall Street analysts had predicted a sharp downturn from the company’s 2018 growth rate, a result of crypto mining demand. In August, Nvidia revealed that it was witnessing a “substantial decline” in sales of GPUs to cryptocurrency miners.
At that time, Nvidia’s Chief Financial Officer Colette Kress stated:
“Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific product revenue was $18 million. Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”
Last month, rival chip maker Advanced Micro Devices, Inc.’s revenue forecasts indicated a similar outcome, and their stocks fell by 20 percent. However, AMD stocks have since begun to recover.
Nvidia hopes to see a similar recovery as it eyes a number of growth drivers, such as design visualization.
Is the crypto mining boom over? Share your views in the comments section below.
Images via Pixabay
