Nvidia hit by crypto hangover

Lloyd Doyle
November 16, 2018

Nvidia's share price is getting hammered right now, dropping more than 18 percent a day after the company announced its third quarter earnings report.

On November 15th, the giant American technology firm reported its quarterly earnings - which showed that the chipmaker's projected nearly $1 billion less in total revenue (compared to to what analysts had predicted) is largely due to declining sales and overall demand for crypto mining hardware. Shares plunged 17 percent in late trading to $168.32.

Chief Executive Jenson Huang said prices for Nvidia's gaming cards had risen with the cryptocurrency frenzy and the high prices drove some buyers away.

"Gaming revenue was short of our expectations, and our fourth quarter outlook is impacted by excess channel inventory of midrange Pascal products", Nvidia said. "And that took longer than we expected, frankly".

"We thoughtwe had done a better job of managing the cryptocurrency dynamics, but when the prices came down, we started to come down", Huang said.

The provisions for inventory lowered Nvidia's gross margins by 1.8 percentage points in the quarter to 60.4 percent, though margins were still up from 59.5 percent a year earlier. This created what Nvidia referred to as a "sharp fall-off in crypto-currency mining demand".

The unsold graphics cards led Nvidia to miss its original revenue projections for the third quarter, which came in at $3.18 billion, down from the forecasted $3.25 billion. "During the quarter, we launched new platforms to extend our architecture into new growth markets-RAPIDS for machine learning, RTX Server for film rendering, and the T4 Cloud GPU for hyperscale and cloud", Huang said. Tariffs on many Chinese-made goods will rise to 25 percent starting January 1. Its rival AMD blamed dwindling demand for chips from cryptocurrency miners for its lower-than-expected fourth-quarter revenue forecast.

At time of publication, Nvidia shares were down 16.2 percent at $169.69 in Thursday's after hours session.

Revenue from Nvidia's closely watched data center chips business rose 58 percent to $792 million, but missed analysts' estimate of $820.4 million, according to FactSet.

Nvidia Corporation, a Delaware, US-incorporated and California-based developer of high-end GPUs, had informed its investors that they must not expect sizable revenue from the company's cryptocurrency mining hardware business.

Analysts on average had expected revenue of $3.24 billion.

Other reports by Iphone Fresh

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