Nvidia Shares Plummet Due to Cryptocurrency Mining Slowdown

Nvidia Shares Plummet Due to Cryptocurrency Mining Slowdown

November 18, 2018

Chip designer Nvidia has its shares drop by over 19 percent due to a slowdown in cryptocurrency mining and a glut of inventory.

What a difference a year makes. Nvidia was crushing it in 2017 as the company enjoyed stellar revenue and demand for its products as the Bitcoin bull run took off. The chip designer took full advantage of the cryptocurrency mining boom, and business was very good indeed. However, 2018 has been a different matter entirely as the entire cryptocurrency market has dropped dramatically. Now the slowdown in cryptocurrency mining has severely impacted the company’s fortunes.

Nvidia Facing Over a $20 Billion Loss in Value

The chip designer has had a rough 2018, and the situation just seems to be getting worse. The company has definitely soured on cryptocurrency mining, and for good reason. Its bottom line has been repeatedly cut throughout the year due to the loss in value for the overall crypto market.

It had been hoped that the latest quarter would see some sunlight as gamers would be picking up graphics cards that used to be too expensive to buy due to past crypto mining mania. Those hopes were dashed as the fourth quarter report shows that the company will miss it’s projected revenue of $3.4 billion by close to three-quarters of a billion dollars. Revenue is expected to only reach $2.7 billion for the quarter.

In a conference call, CEO Jensen Huang said:

We came into Q3 with excess channel inventory post the crypto hangover. I’m hopeful that now that pricing has stabilized, that customers will come back and buy. I guess when pricing is volatile in the channel, it probably freezes some people waiting for prices to stabilize, and that took longer than we expected frankly.

Lack of Demand

The expected surge in interest from gamers and other entities, such as data centers, never materialized once prices began to return to normal. In fact, Nvidia stopped shipping some of their chips to retailers due to this lack of demand and is stockpiling them instead in their warehouses.

In their latest report, the company notes that the lackluster demand for their GPUs led to an almost 40 percent reduction in revenue from personal computer makers. Shares of the company fell by 19.5 percent once the latest revenue projections were released. The net result of this downturn is that the company’s overall value has dropped by over $21 billion.

The situation is far from being resolved. Many chip manufacturers are worried about an escalation in the trade war between the United States and China, which just compounds the problem from the ongoing “crypto hangover.”

As Haris Anwar, analyst at Investing.com, notes:

Nvidia’s inventory build-up is suggesting that the escalating tariffs have started to pinch producers. The company’s disappointing revenue forecast for the fourth-quarter and plunging retail prices of graphic cards show that the market is adjusting to new realities.

What do you think about Nvidia’s stock plunge? Let us know in the comments below.

Images courtesy of Shutterstock.

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