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Nvidia's Third Quarter Results Report Reveals "Encrypted Hangover"
November 17, 2018 by Akshay Makadiya
Powerhouse chip maker, Nvidia, has just released its third quarter financial results, reporting a drop in its revenue because of declining demand for its graphics processing units (GPUs) ) issued by crypto-minors. The slowdown in crypto-extraction left unsold GPUs to Nvidia, which had a negative impact on its revenue for the third quarter of fiscal year 2019.
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Nvidia shares Nosedive with Crypto Hangover
The stock price of the California-based Santa Clara, Calif., Fell 18 percent, while third-quarter figures were far below Wall Street's expectations, partly because of the build-up. Mid-range GPU stocks that were once in high demand by crypto miners. .
Nvidia's graphics processing units were primarily sought after by players until the cryptocurrency boom of last year. CEO, Jensen Huang, said GPU prices had soared due to explosive demand in the fourth quarter of 2017 and the first quarter of 2018, differentiating players.
The GPU shortage forced the company to increase production, but at the same time, the boom in crypto-extraction started to fade. As a result, Huang only attributes the company's exposure to the cryptography market to excessive inventory levels. With the downward trend in sales to minors, the prices of graphics cards began to fall. By Huang:
"We were surprised, of course. We were as surprised as anyone. The crypto hangover lasted longer than expected. When prices went down, we expected a faster increase in demand. We thought we had better managed the dynamics of cryptocurrency. "
According to them income reportTotal revenue for the third quarter was $ 3.18 billion, which is below analysts' expectations of $ 3.24 billion. Underestimating that market expectations are good, Nvidia shares plunged to $ 163 per share, down 43.5% from the record $ 289.36 last month.
Nvidia had it coming
The result was not a surprise to the company or the traders, as some Wall Street analysts predicted a sharp decline in the company's growth rate for 2018, a result of the demand for crypto-extraction. In August, Nvidia revealed that it was witnessing a "substantial drop" in GPU sales to crypto-currency miners.
At the time, Colette Kress, Chief Financial Officer of Nvidia declared:
"Our revenue forecast had anticipated a decline in cryptocurrency-specific products to about $ 100 million, while actual cryptocurrency-related revenue was $ 18 million. While we had previously predicted that cryptocurrency would make sense for the year, we do not expect any contribution for the future. "
Last month, revenue forecasts from rival chip maker Advanced Micro Devices, Inc. showed a similar result and their shares fell by 20%. However, AMD stocks have since begun to recover.
Nvidia hopes to see a similar recovery by considering a number of growth factors, such as visualization of the design.
Is the crypto-exploitation boom over? Share your points of view in the comments section below.
Images via Pixabay
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