The bearish year has been unkind to tech company Nvidia. The mining boom drop off left them backlogged with an outdated, mid-range product. Their Q3 revenue fell short of expectations. Additionally, they anticipate problems to continue into Q4. Consequently, Nvidia (NDVA) stock fell siginificantly.
Nvidia’s main products are graphics cards. In case you aren’t familiar, GPUs, or graphics processing units, help improve hash power for mining. Their design enhance your computer’s ability to handle graphics for video games or rendering. But they also help “render” hashes, as it were.
Nvidia’s revenue over the last year or two has been strongly tied to the state of the crypto market
Traditionally, they manufactured and priced their cards specifically for the gaming market. However, over the last few years they started designing mining-specific products.
Recognizing the high-demand around this time last year, their prices increased accordingly. However, the crypto drop occurred without warning, and they weren’t able to reduce their prices fast enough. Therefore, customers turned elsewhere for cheaper solutions.
The company reported their earnings on Thursday
Wall Street projected a $1.91 billion gaming revenue for Nvidia since this time last year. Revenue did grow, but fell short at only $1.76 billion. Nvidia predicted a revenue of between $2.65 billion and $2.75 billion for Q4.
Additioanlly, Wall Street previously predicted $3.4 billion. Following their report, Nvidia’s stock, NVDA, dropped over 19% into Friday. At $202 a share, this makes it the lowest it’s been since the beginning of 2018.
Unfortunately for Nvidia, the backlog is quite a problem due to outdated hardware
The unsold GPUs are their Pascal line, while they have now already released the new, higher-end Turing devices. It’s unlikely they’ll be able to sell the Pascal units effectively. They must compete with the secondary market, where miners can typically get a much better price.
Sales for the Turing graphics cards have been lackluster so far. In part, this of course could be due to the revenue report. But Nvidia also explains that it may take gaming developers time to catch up with the advanced hardware as well. While the gaming cards launched in Q3, the compatible hardware for game developers are to be released in Q4.
Nvidia CEO Jensen Huang described the current state as a “crypto hangover”. While they are not pleased with falling short of the target, Huang is not deterred:
“We’ve overcome adversity far, far, far greater than this.”
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