Nvidia Revenue Growth Cools amid Crypto Market Shock Waves
The collapse of cryptocurrency prices hurt the financial results of the company, whose chips are used in mining equipment.
The collapse of cryptocurrency prices hurt the financial results of the company, whose chips are used in mining equipment.
Nvidia’s financial results for the third quarter of 2018 came out worse than expected due to inventory overload caused by the end of the cryptocurrency boom, as stated in the official release.
The manufacturer of graphics products for the gaming industry experienced strong revenue growth in 2017, capitalizing on pent-up demand for chips from PC-based cryptocurrency miners. However, riding a hot trend may have adverse consequences once the market cools down.
“Our near-term results reflect excess channel inventory post the crypto-currency boom, which will be corrected," Nvidia founder and CEO Jensen Huang commented.
Third-quarter revenues grew 2% sequentially to $3.18 billion and 21% compared to the same period of 2017. However, investors were not happy with the results as they pale in comparison to the usual 50% quarterly growth registered during the crypto boom. Moreover, the numbers missed the consensus estimate of $3.24bn.
More worryingly, Nvidia downgraded its revenue guidance for the fourth quarter to $2.7 billion, which represents a 7% decrease year-on-year. If the forecasts are correct, Nvidia is about to face the first negative quarter in more than five years.
Cryptocurrency miners buy the cards produced by Nvidia’s core gaming unit, which brings the bulk of group revenue. The drop in demand may translate into a 30% slump in the company’s PC gaming business, CNBC said, quoting an analyst poll by Refinitiv.
“I think the pricing [reductions] just took longer than we expected and the [sales] volume increase took longer than we expected,” Huang was cited as saying by the Financial Times.
The company believes the soft patch will be short-lived since it remains strong overall.
"Our market position and growth opportunities are stronger than ever. 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 noted.
However, it may take some time to bring inventories to normal levels considering the continued slump in the cryptocurrency market.